House labors over slots

The Baltimore Sun

The House of Delegates debated into early this morning on legislation that has become the linchpin of the General Assembly's special session: a bill setting out the details of a slots program if voters approve legalizing the machines next year.

The state Senate has been holding up all other legislation until the House reaches a decision on the second bill of the slots package. With House action, final compromises on the remainder of Gov. Martin O'Malley's plan to erase a projected $1.7 billion budget shortfall and boost spending for health care, the environment, roads and mass transit could come tonight, bringing an end to a special session that has proceeded with fits and starts over the past three weeks.

Both chambers were set to reconvene early this evening.

"We will have, with any luck, the two budget bills in front of us, and if we can come to an agreement with our colleagues in the Senate, we can finish up the special session late [tonight] and everybody can have time for Thanksgiving Week and prepare for January," House Speaker Michael E. Busch told delegates last night.

Although the House voted by a razor-thin margin Friday night to place a constitutional amendment on the November 2008 ballot authorizing slots, House leaders were unsure if the companion bill would succeed, even after the Ways and Means Committee voted 14-5 to send it to the floor.

A final vote was expected early this morning, after The Sun's deadline. A series of delays - including a break for the Legislative Black Caucus to attend a long-planned fundraiser - pushed debate off for hours, adding to mounting frustration in Annapolis.

The Senate, which quickly passed an amended version of O'Malley's entire tax and slots package, has taken no action for more than a week.

"Democracy certainly isn't as pretty as a monarchy, but it's a whole lot better for the people," Senate President Thomas V. Mike Miller said after sending senators home yesterday. "It's just a little slower, though."

Nonetheless, some work is going on in Senate committees and in behind-the-scenes negotiations with the House over the details of the tax package.

"I think we are moving along," said O'Malley, who was briefed by legislative leaders on the negotiations over taxes yesterday morning. "They seem to be working toward consensus. With any luck, we might wrap it up [Sunday night]."

The Senate Budget and Taxation Committee voted 13-2 to approve the referendum bill that the House enacted Friday.

The committee's chairman, Sen. Ulysses Currie of Prince George's County, said the panel did not make any amendments so that the Senate could take final action by today.

Currie said he continues to work with the House fiscal leaders and with the governor's office to reach a compromise on taxes and spending cuts.

"Everything is still open. The bottom line is we are fairly close," Currie said.

Currie said the goal is $1 billion in additional revenue and $500 million in spending reductions.

"If we can't get where we want to be in revenue, we'll have to make more cuts," he said.

The House and Senate tax packages are structured similarly, and both raise about $1 billion for Maryland's general fund, plus about $400 million for transportation. Both include an increase in the sales and vehicle titling tax rates from 5 percent to 6 percent. Both have called for about $500 million in spending cuts.

In areas in which they differ, the question is generally one of degree - the House, for example, would raise the corporate income tax rate from 7 percent to 8.75 percent but the Senate would increase it to 8 percent. Both would change Maryland's flat individual income tax, but the House would add somewhat more progressivity, including a top rate of 5.75 percent for individual incomes above $200,000 a year and joint incomes of more than $250,000 a year.

Miller said the Senate is "not prepared to go higher" than 5.5 percent" for the top personal income tax bracket - incomes of more than $500,000 a year in the Senate bill.

Miller said he expects the Senate will side with the House on how to close a business tax loophole referred to as "controlling interest," which enables some corporations to avoid recordation and transfer taxes by making their real estate part of a limited liability company.

But the Senate-approved "snowbird" provision - which would define a Maryland resident as someone who lives in the state for more than three months instead of six months under current law, and subjects him to the state income tax - is likely to be scrapped because of House opposition, Miller said.

Miller also said he expects the House and Senate to "meet in the middle" on increasing the corporate income tax rate.

First, though, the House had to act on the bill that lays out the nuts and bolts of a gambling program, such as the division of revenues and the procedure for granting slots licenses.

The legislation approved by the Ways and Means Committee allocates 48.5 percent of the slots revenue to an education trust fund and 33 percent to the slots operators, with the rest divided among horse racing purse supplements, local government aid and other expenditures.

The bill has become a difficult test for . Busch and O'Malley because of the place it has come to occupy in Maryland's long-standing debate over slots.

A straight vote on slots - which Busch and many House leaders oppose - would almost certainly fail in that chamber. But Busch agreed to allow a referendum, and the idea of letting voters decide the divisive issue carried the day in his chamber Friday.

Unlike the referendum, which requires a three-fifths' majority, or 85 votes, the enabling bill requires a simple majority of 71. But some delegates who oppose slots voted for the referendum bill but said they would not vote for the enabling bill, seeing it as a pro-slots vote.

The strategy of House leaders appeared to be to couch a vote for the enabling bill not as support for slots but as a means to give Marylanders a sense of what a slots program would be like if they approve it at the ballot box.

"This has been an evolution, and I think it's the best product we can put before the people," Busch said of the implementation bill, which would be moot if the referendum fails.

The argument was apparently successful in the committee.

One delegate who voted for the referendum voted against the enabling bill in committee, but three who voted against the referendum voted yes on the bill.

Del. J.B. Jennings, a Baltimore County Republican, said he voted against the referendum bill because he doesn't like the idea of enshrining such a policy issue in the state constitution. That objection didn't apply to the vote on the companion bill, he said.

"I've always been for slots," Jennings said. "[Friday] was a straight vote on principle."

The House also adopted a few amendments that make its version of the slots enabling legislation different from the bill the Senate passed last week.

The House version requires that any corporations or interest groups who try to influence the slots referendum file campaign finance reports a month before the election. It also provides a slightly higher share of slots revenue for the state's horse breeding incentive fund than the Senate did.

andy.green@baltsun.com james.drew@baltsun.com

Sun reporter Laura Smitherman contributed to this article.

Today in Annapolis

The fiscal leaders of the House of Delegates and state Senate are scheduled to hold a public meeting in the afternoon to discuss the differences between the two chambers' tax plans and to seek a compromise.

The House will then convene late tomorrow afternoon. The Senate is due to begin its session at 6 p.m. to take up tax bills, slot machine gambling and any other remaining issues in the special General Assembly session. Leaders in the legislature hope to complete their work tonight.

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