Slots-vs.-taxes stalemate going down to wire

THE BALTIMORE SUN

Pro-gambling lawmakers scrambled yesterday to assemble a significant tax package that could win approval from Gov. Robert L. Ehrlich Jr. and free the administration's slots bill for a long-sought vote in the House of Delegates.

House Democrats insisted that no vote would come on legalizing slot-machine gambling until Ehrlich agrees to at least $500 million in new revenues.

"The House position is: No taxes, no slots," said Del. Sheila E. Hixson, a Montgomery County Democrat and chairwoman of the House Ways and Means Committee.

The stalemate has overshadowed much of the work in the legislature's final days, as lawmakers anxiously await an agreement by the presiding officers and the governor -- three strong-willed leaders who have yet to blink. The 90-day session is scheduled to adjourn at midnight Monday, though the governor has issued an order to extend it if a budget deal is not worked out in time.

Yesterday, Senate Democratic leaders began quietly circulating a two-year plan that would generate between $300 million and $400 million for general state spending by increasing a tax on sales and transfers of cars, and diverting existing money from transportation and land preservation programs.

"You've got to try different things and run them up the flagpole," said Sen. Ulysses Currie, a Prince George's County Democrat and chairman of the Senate Budget and Taxation Committee. "We're looking into ways to come up with revenues in addition to slots that meet what the House wants and aren't a sales tax or an income tax."

Administration officials were cool to parts of the Senate proposal, saying they had already considered and rejected the car titling tax as part of a still-pending transportation package.

The budget stalemate persisted despite a lengthy afternoon meeting between House leaders and state Budget Secretary James C. "Chip" DiPaula Jr. The two sides failed to find common ground.

"We are looking at all revenue options," DiPaula said. "It is premature to discuss any of them."

Despite the looming deadline and the House leadership meetings, the Senate Budget and Taxation Committee canceled its afternoon work so several senators could attend the Orioles game, using Ehrlich's box.

House Speaker Michael E. Busch and House Democrats made clear that they believe the next move is the governor's: If he doesn't like the package of $670 million in net tax increases they passed last month, he must come up with a substantial alternative, they said.

"If the governor suggests there's another way of raising taxes, that's fine," Busch said at a news conference after the DiPaula meeting. "I don't care where these revenues come from."

The governor insists that his proposal to expand gambling -- legalizing 15,500 slot machines at six locations, eventually raising more than $800 million a year -- would go a long way toward meeting future fiscal needs. But for the fiscal year beginning July 1, 2005, revenues are projected to be $830 million short of spending, even if slots are adopted. Both chambers have passed balanced budgets for next year, with slight differences.

House leaders have been pressing the governor for weeks to explain how he would fill the 2005 hole. DiPaula provided only a vague answer in the private meeting yesterday.

He said the adminstration would reduce unspecified programs by $300 million, transfer $125 million from other accounts and use $50 million unspent from the previous budget year.

The administration also proposes $50 million in unspecified new revenues, much less than the House plan. "It's not even in the same solar system," said Paul E. Schurick, Ehrlich's communications director.

The administration's projections leave a $305 million hole, DiPaula said, which would be covered either through slots money or even more cuts.

So if slots aren't approved, there would be at least $600 million in spending reductions to health care and local government aid. But even with slots, cuts could total $300 million.

So Busch and other House leaders -- as well as some Senate Democrats -- are pushing for what they describe as a "comprehensive plan."

The House has approved a 1-cent increase in the state's 5-cents-per-dollar sales tax, and a higher income tax bracket for taxable family income over $200,000 a year, as well as a property tax decrease for homes and businesses. Ehrlich has pledged to veto the package.

Hixson told her committee members again yesterday that there would be no work on the governor's slots bill until a deal is reached -- further delaying the complex legislation.

The stalemate has Senate President Thomas V. Mike Miller and other Democrats who back expanded gambling desperately seeking a compromise that provides the revenues demanded by the House, but avoids the governor's blanket prohibition on any increase in the sales or income tax.

"We have to find some way the governor and the speaker can both join hands and declare victory," Miller said.

The Senate's proposed titling fee increase -- in essence an increase in sales taxes on new and used cars from 5 percent to 6 percent -- has been approved by the House as part of its $670 million tax package. The increase would generate $145 million yearly, according to House estimates, although senators are considering a deduction for car trade-ins that could reduce proceeds by $60 million.

"It sounds like a sales tax," Schurick said. "This is something the governor considered several months ago and rejected. It's not anything the governor is going to consider now."

The Senate plan would divert into the state general fund existing corporate taxes that are supposed to pay for roads and real estate transfer taxes earmarked for land preservation.

Other potential revenues being floated by Democrats include an increase in the gas tax -- perhaps creating a way of indexing increases to inflation -- or expanding the sales tax to include newspaper and broadcast media advertising. Another is a surcharge on driver's license renewal fees for people with drunken-driving convictions.

The refusal of the House to move on the governor's slots bill angers Miller, who vowed again yesterday to hold up budget talks for action on slots.

"There will be a conference committee when the House moves on slots," said Miller, a chief slots supporter.

Sun staff writer Michael Dres.ser contributed to this article.

Yesterday's actions

CONSTRUCTION: The House of Delegates unanimously approved a $628 million capital budget for the fiscal year that begins in July, after Democrats fought back a Republican-led effort to strip $32 million for expansion of the Lowe House Office Building in Annapolis and use the money for school construction. Differences between the House and Senate capital programs - supported by taxpayer-backed bonds - must be settled by a committee of negotiators.

SPEED CAMERAS: The Senate voted 27-16 to pass a bill allowing police in Montgomery and Prince George's counties to use speed cameras in residential neighborhoods and near schools. The cameras would photograph the license plates of speeding cars and send tickets through the mail. The House has not yet taken action on an identical bill. The governor vetoed a similar measure last year.

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