ANNAPOLIS – Gov. Robert Ehrlich released a supplemental budget Friday that tapped the Rainy Day Fund and earned praise from his fiercest budget foes by raising the property tax a nickel.
At the same time, Ehrlich vowed to reject a measure the House passed Friday morning to study, rather than approve, legalizing slot machines, one of the governor’s marquee budget balancing plans.
House Speaker Michael Busch, D-Anne Arundel, applauded the governor for the budget that clipped $106 million from the reserve fund, raised $165 million with a 5-cent property tax, added $85 million from increased business fees and relied on lawmakers to cut an additional $85 million from programs.
“The governor’s plan is a wonderful, good-faith effort,” said Busch, who has repeatedly criticized Ehrlich for his handling of the budget.
Maryland faces a $2 billion deficit that must be closed by April 7, the date the General Assembly is scheduled to adjourn, and lawmakers rejected $395 million Ehrlich expected from slots this year that now can’t be used to plug the gap.
The Rainy Day Fund was intended for these scenarios, said House Majority Leader Kumar Barve, D-Montgomery, “We’re drenched fiscally. . . . We’ve got gale-force winds and driving rain.”
The governor “wants to be a leader and make some hard decisions,” Barve said.
Maryland’s Board of Revenue Estimates’ recent decision to cut $106 million from the budget and the loss of license fees from his slots proposal, made the tax increase, fees and fund-raiding necessary, Ehrlich said in a written release.
“Today’s proposals follow discussions with the Legislature’s fiscal leaders and frame a potential consensus for containing the state’s looming budget woes,” Ehrlich said.
The General Fund has been subsidizing the public debt for too long, said Budget Secretary James C. “Chip” DiPaula Jr.
Ehrlich’s use of a property tax was not an effort to horsetrade with lawmakers favoring taxes over slot machines, DiPaula said. In fact, the Maryland Constitution requires public debt be paid through property taxes, a provision the previous administration violated by using General Fund money for debt service, he said.
Lawmakers from Ehrlich’s own Republican Party are balking at the property tax increase and are working to find $165 million in spending cuts to offset it.
But Senate Minority Leader J. Lowell Stoltzfus, R-Somerset, said it’s no easy job. “The governor’s already cut more than half (of) $1 billion. I would support cuts first, but I’m not sure we know where they are.”
More cuts may be required, if the House wins its battle against slots. The House has rejected more than $150 million in slot machine revenue counted on by Ehrlich.
The lower chamber Friday approved, 126-11, a plan to study, and some say, delay, slot machines with a commission that wouldn’t release its findings until December.
“A study won’t fund (education) this year,” said Ehrlich spokesman Henry Fawell, although there was broad Republican support for the measure.
When the House begins budget floor debate next week, Busch said a mix of new revenue and cuts will be blended to fill the fiscal hole. Sales tax and income tax increases are off the table, he said.
Busch backed the corporate fee increases, including a 150 percent increase on the corporate filing fee, that Ehrlich just announced, and added that closing more tax loopholes are under consideration.
Look for the House to propose taxes on Maryland companies with operations in Delaware and eliminate the vendor’s administrative portion of the taxes they collect, Barve said.
Republican leaders in the House attacked the property tax increase, but Minority Leader Al Redmer, R-Baltimore County, said it had nothing to do with their support for his proposal for slot machines at the racetracks.
“The governor had to do what he had to do,” Redmer said, “That’s not going to have any effect on a completely separate issue (slots).”
Redmer’s support didn’t gel with the administration’s viewpoint, Fawell said. Although Ehrlich values Redmer’s decision to support the study, the governor hates the bill.
So does a leading slots opponent in the House.
“This was a way to flim-flam the public, be on both sides,” said Delegate Luiz Simmons, D-Montgomery, the only slots opponent and moratorium backer to vote against the bill. “I really feel that the bill is more charade than it is substance.” -30 – CNS-3-14-03