Gov. Robert L. Ehrlich Jr. confirmed yesterday he will introduce legislation this year to legalize slot machines, and his budget director warned that Maryland's landmark public schools reform initiative would be scaled back if the gambling bill fails for the second consecutive year.
Ehrlich would not disclose the details of his plan, which an aide said could differ from his slots-at-racetracks initiative passed by the Senate but killed by the House of Delegates last March.
Since then, a committee under the direction of House Speaker Michael E. Busch has explored other options, including the possibility of slots emporiums built and managed by the state along highways.
The governor has previously expressed some support for off-track slots, as well as another Busch proposal to prevent a company or person from holding more than one gambling license.
"I suspect the bill will in fact reflect the new political realities in Maryland," said Ehrlich spokesman Paul E. Schurick.
Earlier in the day, state budget secretary James C. "Chip" DiPaula Jr. reiterated a grim warning that the fate of popular education programs hangs on the gambling plan.
DiPaula said a costly state education initiative, a program to add $1.3 billion yearly in spending for public schools known as the Thornton Plan, would have to be drastically altered without money from gambling.
"Without slots, we cannot afford it," DiPaula said during a breakfast meeting sponsored by Ehrlich's former law firm, Ober/Kaler, which is increasing its lobbying presence in Annapolis.
Such a threat resonates in Baltimore City, Prince George's County and less-wealthy jurisdictions counting on additional state resources.
Busch, the key critic of the governor's slots plan, rejected the administration's contention that slots should pay for education. A 1-cent increase in the state sales tax rate, from 5 to 6 percent, is a preferable funding source, he said, and gambling doesn't cover the program's entire costs.
"I don't know what the rationale is for funding education on an unstable revenue source: the expansion of gambling," Busch said. "I think you find a fair and equitable revenue source at the state level. The fairest way is a penny sales tax dedicated to education."
Ehrlich has ruled out broad-based tax increases.
"Governor Ehrlich is not going to raise income taxes," DiPaula said yesterday. "He is not going to raise sales taxes. He is not going to tax our way out of this problem."
The positions staked yesterday by political leaders in Annapolis crystallize the debate that will dominate the General Assembly for the next three months; lawmakers convene in a week for their annual 90-day session.
Legislators must decide this year whether the state can afford the education initiative, which was approved in 2002 without specifying how to pay for it.
Ehrlich's budget plan, which he will submit this month, will likely include about $380 million for the third of six installments of the education program. But without revenues from slot machines, the future years of the program are in doubt. DiPaula said the state must lower the annual cost, and spread out the payments.
With no expansion of gambling, "I believe we can no longer meet the current schedule of Thornton," DiPaula said.
Senate President Thomas V. Mike Miller agreed that slots revenues seem to be the only acceptable alternative for funding schools because the governor is rejecting other means.
"If there are no revenues, there is no Thornton formula in the future. That's a true statement," Miller said. "The reason a majority of us supported slots so strongly last year, and this year, is we see it as the viable means for funding education."
DiPaula's statements also reflect a blame-avoidance strategy under way in Annapolis. Ehrlich and the overwhelming majority of General Assembly members campaigned as supporters of the schools plan; no one wants to be painted as the leader who backed away from the program.
"I think what we are seeing is a big game of chicken between legislative leaders in Annapolis," said Chris Maher, education director for Advocates for Children and Youth. "The victims of those politics will be children in public schools in Maryland."
DiPaula said Ehrlich alone has offered a plan to pay for education with slots, and that the Assembly has rejected it.
But Busch said that lawmakers are not to blame. "Everything starts with the administration and the executive office," the speaker said. "I think you need a comprehensive solution."
Ehrlich "might not tax [his] way out, but I don't know anybody that's been successful gambling their way out" of a budget crisis, Busch said.
Sun staff writers Greg Garland and Michael Dresser contributed to this article.