The Maryland Public Policy Institute
MPPI IN THE NEWS
OCEAN CITY — Slot machine gambling roared back into the state budget debate this week as Republican lawmakers outlined a plan for solving the $1.5 billion deficit and the O’Malley administration released a report proposing slots as a way to make Maryland’s struggling horse racing industry competitive with that of neighboring states.
Slots revenue, slower budget growth and no new taxes form the foundation of the plan outlined by the House Republican Caucus on Wednesday in Annapolis.
Republicans said they are worried that the budget conversation among Democrats is turning increasingly toward new taxes.
Talk around Annapolis has revolved around ‘‘tax code modernization, tax code fairness ... a service economy, a 21st century economy,” said House Minority Whip Christopher B. Shank.
‘‘All these buzzwords, as far as we’re concerned, simply mean that the Democrats in Annapolis are preparing to raise the taxes on the hardworking families of the citizens of the state of Maryland. And we’re not having it,” said Shank (R-Dist. 2B) of Hagerstown.
The plan — based on data from state budget analysts and the Maryland Public Policy Institute, a Germantown think tank — calls for limiting growth of the state’s $15 billion operating budget to 3.5 percent in fiscal 2009, which begins July 1. That compares with the 8.5 percent increase projected by state budget analysts.
To hold down the increase, the plan calls for curtailing projected spending on education, Medicaid, aid to local governments and other programs.
The plan does not dip into the state’s so-called rainy day fund. Gov. Martin O’Malley (D) used $967 million from the fund to avoid any serious cuts or new taxes in the budget for fiscal 2008, which began July 1.
GOP leaders were reluctant to give many details about how their plan would avoid spending cuts or taxes, saying it is not time to show their hand.
‘‘We will hold that in abeyance,” said House Minority Leader Anthony J. O’Donnell (R-Dist. 29C) of Lusby. ‘‘We’re not laying that marker out there. We’re not getting sidelined into that trap.”
Revenue from licensing 15,000 slot machines at six to-be-determined venues would generate $600 million in up-front proceeds that could go toward the deficit, according to the plan, which calls for 20-year licenses to be auctioned by a national investment bank. Licenses would go to the company whose bid would give the state the greatest amount of revenue from the machines.
Worries about local burden
Montgomery County Executive Isiah Leggett (D), who joined county and state lawmakers at the Maryland Association of Counties’ annual summer conference in Ocean City this week, called the Republican’s proposal ‘‘a nonstarter.”
Montgomery County is already facing a $270 million gap in its fiscal 2009 budget, Leggett said. ‘‘That gap becomes wider if you say, ‘Do the reductions that the Republican Party suggests,’” he said.
Using slot licenses, which the Republicans say would raise revenue up front, is risky, Leggett said. Pennsylvania has not had money from newly approved licenses flow into state coffers as quickly as expected, he said.
‘‘That’s a lot of money to let ride on the assumption that you’ll get that kind of money in such a short period of time,” Leggett said of the $600 million in licensing fees assumed by the Republican plan.
County officials around the state are increasingly wary that the budget could be balanced on their backs, something O’Malley has said he will not do. However, as the summer wanes with no sign that legislative leaders are any closer to a budget solution, the chances that lawmakers could return to Annapolis for a special session are dwindling.
O’Malley said Thursday that he hopes a special session occurs. He would be the one to call for it, although he is unlikely to do so without at least the framework of a plan that leaders of both chambers agree on.
Without a special session, O’Malley will be forced to present his budget in the opening weeks of the next legislative session in January. That, lawmakers say privately, is where lines will be drawn.
Senate Republican leaders have yet to offer a proposal, although O’Donnell said both GOP caucuses are ‘‘very closely aligned.”
Senate Minority Whip Allan H. Kittleman (R-Dist. 9) of West Friendship, who has voted for slots in the past, said he is not going to agree to vote for a proposal until he knows what is being offered.
‘‘I certainly support their efforts to have no new taxes,” Kittleman said of the House Republicans’ proposal.
Not only does approval of a slots package depend on the House, where Speaker Michael E. Busch (D-Dist. 30) of Annapolis has mounted strong opposition, it also depends on whether there are enough votes in the Senate.
‘‘That is not a sure thing right now,” Kittleman said.
The Perez report
On Tuesday, state Labor Secretary Thomas E. Perez issued a report that named slot machines or subsidies from the state’s general fund as options for saving the state’s struggling horse racing industry.
Perez wrote the report after touring horse tracks in Delaware, Pennsylvania and West Virginia.
The report found that slots brought Delaware and West Virginia newfound competitiveness with the purses in Maryland’s horse racing industry.
‘‘Marylanders playing slots in West Virginia and Delaware contributed approximately $150 million to the tax coffers of these states in 2006, and it is not yet clear how much more has gone to Pennsylvania in 2007,” the report said.
Perez’s findings appear designed to bolster O’Malley’s case for making slots part of a budget solution, a position the governor reiterated during an interview on WICO radio in Salisbury on Thursday.
‘‘I think we’ve overestimated how much slots can yield for the budget challenge,” O’Malley said. ‘‘It was a wonderful crutch for some to be able to say, ‘Hey, if we only had slots all of our challenges would go away.’ Well, it’s not going to make all of our challenges go away, but I think it can be a part of the mix.”
O’Malley continued to push slots as a remedy for the ills of the racing industry.
‘‘The public overall, I believe, feels that with other states using slots to support their racing industry that we should not prohibit our racing industry from using it as well,” he said.
Comptroller Peter V.R. Franchot — who opposes slot machine gambling in Maryland — said Wednesday he was disappointed with the Perez report.
‘‘It’s a missed opportunity. We could have gotten a fresh perspective on slots, and we got something that Joe DeFrancis could have written,” said Franchot (D), referring to the chief executive officer of the Maryland Jockey Club, which operates two racetracks in the state.
Franchot said he would like to see a similar report on plugging the state’s budget shortfall. ‘‘It’s really a fool’s message that we ... have to bring in slot machines with all the negatives associated with slots. That’s just wrong.”
Staff Writer Douglas Tallman contributed to this report.