ANNAPOLIS – Maryland’s budget deficit grew to almost $2 billion, officials announced Tuesday, a scenario Gov. Robert Ehrlich says favors his controversial plan to install slot machines at racetracks.
Historic snowfall, impending war with Iraq and a lagging economy have “created a more dismal picture than we had in December,” said Comptroller William Donald Schaefer in a prepared statement Tuesday after the Board of Revenue Estimates decided almost 1 percent of expected income tax receipts won’t materialize.
Income tax receipts dropped $76 million and sales taxes slipped $21 million, declines the revenue board do not expect to be made up next year. The four-member panel struck $106 million in expected tax revenues from this year’s budget and $112 million from the 2004 figures, a total of $218 million.
Lawmakers already scrambling to cover what was a $1.8 billion deficit say taxes, cuts and $115 million from the Rainy Day Fund will all be considered to shore up the sagging budget.
Closing the deficit has been the most divisive issue of the session.
The House favors taxes and cuts over slots, while the Senate backs Ehrlich’s plan for slots and, until recently, considered all taxes off the table.
But there’s talk that a deal is in the works to resolve the differences among the factions.
The three most powerful lawmakers in Annapolis are expected to present a new revenue package tomorrow, said Ehrlich Communications Director Paul Schurick.
House Speaker Michael Busch, D-Anne Arundel, Senate President Thomas V. Mike Miller, D-Calvert, and Ehrlich will likely meet tomorrow afternoon and introduce a new revenue package that all parties are expected to approve.
Should the leaders fail to agree to a new package, lawmakers have already embarked on their own course to solving the budget crisis.
Slots money will not be included in the 2003 or 2004 budgets, both chambers seem to agree. Lawmakers in both houses are still smarting after Ehrlich withdrew his original slots plan, delayed a substitute and then failed to disclose plan details to even-supportive legislators.
All sides agree new revenue sources or significant cuts will be necessary in the out-years to fund school construction and health care costs.
“Slots certainly got a boost,” Ehrlich said, and some lawmakers agree.
“I think the pressure is there for slots, especially with the new worse revenue predictions,” said Senate Finance Chairman and slots opponent Thomas M. Middleton, D-Charles, who believed the machines were a sure bet until 10 days ago.
Since then, Ehrlich redrew his plan to include 1,000 more machines, but it left a $230 million gap in the current budget and gave tracks more revenue than the state.
“The governor’s rhetoric wasn’t true,” said Appropriations Chairman Howard P. Rawlings, D-Baltimore. Ehrlich’s first bill would have created gridlock, and his second still is not ready, Rawlings said.
House leaders think taxes will be necessary, but not slots. They’re seeking an income tax surcharge on residents earning over $200,000, however Rawlings wants more.
“Funds from slots and a 1-cent sales tax increase have to be tied together,” Rawlings said.
Funding for the state’s education increases is “in serious jeopardy without both.”
“I think that’s the only way a sales tax would pass,” Rawlings said.
But that would involve compromises both sides can’t make, said Delegate Herb McMillan, R-Anne Arundel.
“That is the worst possible combination that you could have,” McMillan said. “Can’t think how people who have fought so hard against slots could vote for that. And on the other side, I can’t think about how people who have fought so hard against taxes could vote for that.”
The governor would surely veto such an agreement that would violate his principles, spokesmen said. Only taxes that don’t affect sales or income will be considered.
Spending discretion would have made the budget problems much easier, Ehrlich said, but were a major reason he believes he now lives in the Governor’s Mansion.
“I truly believe I was elected to solve these problems,” Ehrlich said. “The bill has come due in a very big way.”