The $22.8 billion state budget unveiled by Gov. Robert L. Ehrlich Jr. yesterday contains a stark challenge for the General Assembly: Legalize slot machine gambling, or slash $395 million in valued services.
As expected, Ehrlich's first budget relies heavily on money from slots to close a projected $1.3 billion gap between revenues and expenses in the coming year. It also cuts programs by $430 million and uses $324 million for one-time fixes by tapping a transportation fund and other reserve accounts.
Administration officials concede that they have offered only a partial solution to the state's budget woes but said that that is all they have had time to do since Election Day.
The spending plan, they said, fulfills Ehrlich's campaign promise to meet the requirements of a landmark school-funding initiative while avoiding employee layoffs and tax increases.
"The governor and I were handed a $1.8 billion budget deficit [over two years], and we had 10 weeks to fix it," said Lt. Gov. Michael S. Steele. "We are spending within our means. This budget is a sustainable, honest budget."
Legislative leaders briefed yesterday over a breakfast of eggs and bacon inside the governor's mansion gave the plan generally good reviews, recognizing that if they decide not to legalize slots this year - a distinct possibility - their work becomes more difficult.
"I think the proposal is one we can work with him on," said Sen. Ulysses Currie, a Prince George's County Democrat and chairman of the Budget and Taxation Committee. "I gave him high marks on the process because he appears to be reaching out. I think it is going to be very difficult at best to get a slots bill through. We have to, I think, work with him on other revenue to fill the hole if slots fails."
As local officials and advocates digested the data throughout the day, disappointment and frustration surfaced.
Ehrlich has proposed taking $300 million from a transportation trust fund over two years to pay for general government operations, as well as withholding $102 million from counties for road projects.
Local reaction
For a governor who promised to end gridlock in the Washington suburbs and protect aid to counties in tough budget times, the moves are startling, local leaders said.
"He's doing to Maryland what two Republican governors did in Virginia, where they basically bankrupted the transportation program," said Montgomery County Executive Douglas M. Duncan, a Democrat and potential 2006 rival of Ehrlich. "Parris Glendening did not have a vision for transportation, and Bob Ehrlich with his budget is making it worse because he has a negative vision for transportation."
Baltimore County Executive James T. Smith Jr. said his county stands to lose $11.7 million for snow plowing and road repairs under the governor's plan. "I'm disappointed the governor did not keep his commitment not to cut state aid to local jurisdictions," he said.
Administration officials say tapping the transportation fund would not delay road projects proposed for the next several years.
But they acknowledge that they have no firm timetable for construction of the Inter-County Connector, a long-studied Montgomery County highway that Glendening opposed and Ehrlich pledged to build. Traffic issues are the top concern of voters in Montgomery, the state's most populous jurisdiction.
"Every major proposal - the Purple Line [extension of the Washington, D.C., subway], the ICC - is now in jeopardy because of his actions," Duncan said.
Ehrlich offered a more optimistic view, saying that every county gets more money next year because he met the Thornton Commission's public school recommendations.
The governor said his plan increases public school funding by $242 million and sets aside $128 million more for Medicaid expenses. Those priorities drew praise from interest groups.
"He's living up to his promises so far, and that's significant," said Christopher Maher, education director for Advocates for Children and Youth. "There was a lot of uncertainty and hand-wringing going into the budget."
During his campaign, Ehrlich pledged a top-to-bottom review of state government and said he could squeeze "efficiencies" of 4 percent from each agency. He now says such a review will take months longer, and broader changes will come in a year.
Ehrlich found room for $30.2 million in initiatives of his own design, including $2.9 million to hire more public defenders and $7.5 million for a juvenile services education program.
"They go to the very core of what government is supposed to be about," Ehrlich said.
Overall, the general fund budget, which pays for most state services, would rise 4.3 percent, from $10.4 billion to $10.8 billion. Ehrlich would cut a 2 percent pay increase for state employees, which was negotiated by Glendening, and he proposes cutting 1,387 vacant positions while adding 431 new ones. The state work force would drop to 79,860 positions, from 80,816.
Health insurance costs for workers would go untouched, but a hiring freeze remains in place. State workers will be forced to do even more work with fewer resources, said Sue Esty, a lobbyist for the American Federation of State, County and Municipal Employees.
Apart from including a number in his budget, Ehrlich offered few new details of his slots proposal. He repeated his desire that machines be placed only at four racetracks, and he said that the total number of machines would be less than the 18,000 that the racing industry wants.
Ehrlich is projecting $350 million in one-time payments for slots licenses, plus $45 million in revenue from machines that he anticipates will be in operation by spring 2004.
Limited choices
Framing the debate that will consume Annapolis for the next 2 1/2 months, the governor said that if lawmakers don't like the slots plan, their choices are limited. "You either pass the bill and compete [with West Virginia and Delaware] and put the majority of money in education, or you pass a tax - which is not going to happen - or you make more cuts," Ehrlich said.
House Speaker Michael E. Busch, a slots opponent, does not back away from tax increases. "You have to put everything on the table, whether slot machines or taxes," said the Anne Arundel Democrat.
Jeffrey C. Hooke, an investment banker from Chevy Chase, said that the upfront fees Ehrlich is proposing for slots licenses are far too low and would shortchange the state.
"One hundred million dollars for a slot machine monopoly in metropolitan Baltimore seems extremely low, regardless of what the [state share] is set at," said Hooke, who is affiliated with an advocacy group called Project $1.5 Billion that is pushing for Maryland to get the greatest financial benefits possible if slots are approved.
Of 54 state agencies that use operating funds, 30 would see their budgets lowered in next year's budget - largely through the elimination of vacancies. The university system would lose $67 million in a year-to-year comparison, while the budget for the Department of the Environment would shrink from $50 million to $42 million.
The governor and legislators said they realize they have difficult choices in the years ahead. Ehrlich's projections show a $434 million gap to be filled next year, rising to $987 million in four years.
The Ehrlich budget also leaves untouched Maryland's $505 million rainy day fund. Tempting as the surplus might seem, the time is not right to use it, said budget secretary James C. "Chip" DiPaula Jr.
Sun staff writers Ivan Penn, Tim Craig, Michael Dresser and Stephen Kiehl contributed to this article.
Budget initiatives
Highlights include:
$11 million for a new Charles H. Hickey Jr. School education program and improved mental health and substance abuse treatment for juvenile offenders.
$11.3 million to expand services for Marylanders with developmental disabilities.
$2.9 million to relieve caseloads of public defenders.
$800,000 for services to assist people with traumatic brain injuries.
Source: Governor's budget