OCEAN CITY - House Speaker Michael E. Busch sharply defined the boundaries of the coming debate over how Maryland should pay for improved schools, saying he thinks an increase in income or sales taxes should provide the foundation for better education, not slot machine gambling.
Speaking before a standing-room-only crowd at the summer meeting of the Maryland Association of Counties, Busch said state officials have a "responsibility" to raise taxes to close a huge gap between projected revenues and expenses for schools, health care and other needs.
"The responsibility in this budget deficit is for the state to step up to the plate," Busch told county elected officials and managers. "It's our responsibility to take the lead."
He also said that the state's 10 percent reduction in income taxes between 1998 and 2002, and its failure to raise the gasoline tax in the late 1990s, were mistakes.
Busch's remarks placed him at odds with the views of Gov. Robert L. Ehrlich Jr., leaving many state leaders fretful that a compromise over the state's fiscal problems lies far away.
"I think Busch threw down the gauntlet," said Comptroller William Donald Schaefer.
Spending the week in Ocean City, Ehrlich said the people he encounters at this beach resort show that Busch is out of touch with the desires of most voters. Ehrlich says he hears no sentiment for higher taxes, and believes Marylanders want him to stand resolute.
"Obviously his leadership is quite different than our administration's," Ehrlich said in an interview. "We had a spending spree, and it caught up with us."
Moments before Busch spoke, the state budget secretary, James C. "Chip" DiPaula Jr., told the crowd at the county association meeting that Ehrlich continues to oppose increases in sales or income taxes.
The way to pay for a law that requires $1.3 billion more yearly in public school spending by 2008, DiPaula said, is to trim the fat out of state government and legalize slot machines.
The summer county association meeting is considered a bellwether of the ideas that will dominate state affairs in the coming months, especially when the General Assembly convenes in January. Those who heard DiPaula and Busch's widely divergent views could only conclude that Maryland faces a tumultuous debate over how to balance the state budget.
Sen. Thomas M. Middleton, a Charles County Democrat and chairman of the Senate Finance Committee, said, "This is going to set the tone for the session."
The issue of legalized slot machines consumed the General Assembly this year, with Ehrlich backing a proposal to allow video lottery terminals at racetracks. The plan would eventually have generated $700 million yearly, earmarked for schools.
That is only a portion of what's needed to pay for the Thornton Commission law, which requires increased school spending so the state meets its constitutional obligation to provide an adequate education to all youngsters. Thornton will cost $365 million next year, and $1.3 billion by the 2008 budget year. Maryland now spends $3.6 billion yearly on public elementary and secondary education.
Many lawmakers have said that a combination of gambling and a sales or income tax increase should be used to pay for schools and other programs. Busch offered a different view yesterday, saying the Thornton plan, passed during an election year with no identified funding source, should be covered by an increase in an existing revenue source.
"I think we ought to have the courage to step up to the plate and find a traditional revenue source to do [Thornton]," Busch said.
Schaefer weighed in on the school funding debate yesterday, saying next year's $365 million allotment should be cut in half because the state can't afford it now.
"I'm not for funding Thornton completely," Schaefer said. "Half, that will kill me, but I believe it."
DiPaula, too, played a role yesterday in polarizing the budget views of the administration and the legislature. Some leaders have said that, in recent weeks, Ehrlich has sounded increasingly open to the idea of expanding the sales tax to include services not now taxed. Critics say the state's sales tax is a relic of a bygone manufacturing-based economy that omits new industries that have blossomed.
DiPaula rejected expanding the sales tax, saying, "The governor doesn't believe that's where we need to go."