Budget cuts tied to slots

While the state braces for budget cuts that are expected to significantly impact bread-and-butter programs such as education and public safety, leading politicians are seizing the opportunity to talk about another hot topic - slot-machine gambling.

Gov. Martin O'Malley brought up the November referendum to legalize slots yesterday as he discussed spending cuts that he plans to present Wednesday to the Board of Public Works. A list of recommended cuts he's considering reads like a catalog of unappealing options: public schools, state police, community colleges and health care programs.

After explaining to TV cameras at an event yesterday that the budget cuts have been brought on by the worst national economic climate in his lifetime, the Democratic governor repeated a refrain: "I hope voters will support slots in Maryland."

The need for budget cuts highlights an argument that slots advocates have been making for months in advance of November's gambling referendum. They argue the plan, expected to generate more than $600 million a year, would be the salvation of the state budget. The timing also limits the avenues for anti-slots forces to counterattack.

Comptroller Peter Franchot, the state's most outspoken slots foe and a frequent O'Malley critic, has no choice but to acknowledge the budget crisis - state revenue reports come from his office. He indicated yesterday that he would likely support O'Malley's cuts in the Board of Public Works vote.

Franchot made a more nuanced fiscal argument against the slots proposal - that it would include new spending the state can't afford, including a $100 million annual "bailout" of the horse racing industry, and would strain the budget through increased crime and bankruptcy.

"As we are managing our way through this deficit, we should not be encouraging our citizens to vote for more spending," Franchot said in an interview. "Citizens are scared about their IRAs, college savings plans, their jobs and the economy. Those fears should not be taken advantage of."

The state Republican Party, divided on slots, is in a tricky spot, too. James Pelura, the party's chairman, issued a statement yesterday accusing O'Malley of cutting vital services and planning to raise taxes if the economy gets worse, though the governor has indicated an unwillingness to raise taxes again after having done so last year. Pelura did not mention slots nor O'Malley's plea to voters to approve them, even though the devices are projected to ease the fiscal pressure on the state.

The Senate GOP caucus has declined to take a position on slots. But House Republicans and former Gov. Robert L. Ehrlich have blasted the proposal. While the Republican governor pushed for slots while in office, he opposes the current proposal to change the constitution to allow them and argues slots proceeds would fuel unrestrained spending.

The slots proposal, if approved, would allow 15,000 slot machines in five locations. Proceeds would be divided among gambling operators, government coffers and the horse-racing industry.

O'Malley's warning about potential backsliding on education and other priorities comes after months of similar cries from a ballot committee advocating for the gambling proposal. The group says tax increases would be needed if voters reject slots.

Opponents point out that slots proceeds wouldn't be available for several years until the program is established, and they argue that projected revenue has been overstated. Franchot has called for a top-to-bottom overhaul of the state's budget instead of slots.

Slots opponents also have argued that people will have less money to gamble as the economy crumbles. According to Franchot's office, lottery revenue has dropped 13 percent since July.

But Donald F. Norris, chairman of the public policy department at the University of Maryland, Baltimore County, said more complicated economic arguments are harder to get across to voters.

"This is going to put a lot of pressure on the opponents of slots to show why in an economy when the state really needs money that we shouldn't have gambling," Norris said. "It will make it much easier for the proponents to sell gambling as a source of 'free' or new money."

O'Malley's budget secretary, T. Eloise Foster, has recommended $397 million in potential cuts from which the governor will choose. The state faces a $432 million revenue shortfall this year but has some reserve funds it can use to help fill the gap.

Among the proposals is a $38 million cut to an initiative that provides extra funding for school districts where the cost of education is higher and a mandatory six-day unpaid leave for state employees that could yield $48 million in savings.

While O'Malley might not implement all of the recommendations now, he might do so in the coming months. The economic outlook is bleak, and the revenue shortfall is projected to balloon to $1 billion next year.

O'Malley said yesterday that he probably won't implement the proposed furloughs or cuts to the education initiative next week. He said he has to speak with school boards and state employees first. "Those will take a little longer before we zero in on them," he said.

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