Senate passes $22.6 billion budget bill

Sun Staff

With time for compromise slipping away, the Maryland Senate adopted a budget last night that relies on slot-machine gambling and higher taxes on properties, corporations and health insurance policies to pull the state through the coming year.

The $22.6 billion budget passed with bipartisan support as just 10 days remain for the Senate and House to resolve differences between each chamber's spending plan. The House budget, approved this month, avoids slots and imposes different taxes and fees.

As expected, the issue of whether more gambling should be allowed at racetracks has emerged as the major sticking point, and is now tied to the Senate's version of the budget. House Speaker Michael E. Busch and Gov. Robert L. Ehrlich Jr. met yesterday in their latest effort to reach common ground on gambling but reported little progress.

Both said they would keep meeting, but there is growing concern the Assembly may not finish its work by a scheduled April 7 adjournment.

Ehrlich is expected to issue an order Monday authorizing an extension of the session; while such orders are not uncommon, lawmakers have gone into overtime only once since 1917.

"I'd do anything to avoid it," said Senate President Thomas V. Mike Miller. "I'd get in the ring with both of them, quite frankly."

Apart from slots, the House and Senate budgets share broad similarities, relying on about the same amounts of new revenues and taxes, cuts and transfers for a one-year fix that all sides agree still leaves a $700 million hole for the fiscal year beginning July 1 next year.

Nonetheless some of the differences are significant.

The Senate approved a 10 percent surcharge on corporate income taxes to raise $33 million, a tax not imposed by the House. The House budget raises corporate filing fees by $126 million and cuts higher education by $36 million, while the Senate uses $48 million in fees and trims $2 million from universities.

Tensions rose yesterday as lawmakers debated unpleasant cuts to children's health programs, private colleges and other areas.

"We are pitting poor people against poor people," said Sen. Nathaniel J. McFadden, a Baltimore Democrat, who at one point chided a colleague for advocating more spending while opposing higher taxes. "At some point, you have to look for a revenue source to help."

In a move that left some senators complaining that their votes were being manipulated, Miller split the Senate's budget plan into four pieces - some of which were more palatable than others.

In addition to the main spending plan, senators approved a $1 billion budget-balancing bill that authorizes huge transfers from unspent accounts, imposes higher annual filing fees on corporations, and contains money from slots.

Separately, lawmakers backed a tax bill that imposes a premium tax on health maintenance organization policies, the one-year corporate income tax surcharge, and $16 million in higher taxes on cigars and chewing and pipe tobacco.

A week ago, the Senate approved the fourth component: a bill authorizing slot machines that anticipates $15 million in application fees from racetrack owners. The maneuvering allowed Republicans who signed no-new-taxes pledges to vote against the tax bill, while still approving the budget.

"It gives cover to Republicans," said Sen. Paul G. Pinsky, a Prince George's County Democrat. "On the slots issue, [Miller is] pushing a bipartisan plan. But on the budget, he wants the Democrats to do the heavy lifting."

Sen. Delores G. Kelley of Baltimore County said she voted against the budget and the balancing bill because of the strategizing - which was going on as recently as yesterday morning, when Miller was shifting the corporate tax from one bill to another to line up Republican votes.

Miller said he did what he needed to do to win approval. "They saw politics at its best, and they saw politics at its worst," he said.

Leading lawmakers, including Miller, continued to talk about the need for a major increase in the state's sales or income tax - something that Ehrlich has continued to say he would veto this year, even if he could get his slots plan in exchange.

"The revenues we propose are fairly modest," said Sen. Ulysses Currie, chairman of the Budget and Taxation Committee. "They will get us through the next year, but we face the same situation when we reconvene in January."

Lawmakers debated whether to cut $4.2 million in state funds and $7.9 million in federal funds from a popular program that provides health coverage to children of poor and working-class families. About 3,000 children would become uninsured.

An amendment that would have shifted $3 million from private school textbooks into the health program was rejected.

Later in the day, Ehrlich announced that federal officials had released an unexpected $114 million in federal matching funds for the program, 11 days after the governor wrote U.S. Secretary of Health and Human Services Tommy G. Thompson asking for assistance.

The money, he said, proves he can back up his campaign pledge that as a former congressman he would be more effective than previous administrations in securing federal dollars. "It's good to have friends in high places," Ehrlich said.

Still, state officials face the prospect of leaving some of the money unspent, said state health Secretary Nelson Sabatini, because federal dollars only match state dollars.

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