Budget creates gulf between chambers

March 31, 2003|by LAURA ERNDE

With just over a week left in the Maryland General Assembly's 2003 session, the state's biggest problem - its budget deficit - remains unsolved.

House and Senate leaders have crafted drastically different approaches to filling a gap that's approaching $2 billion in fiscal 2004. There is no clear indication of how the two sides will compromise before the session ends a week from Monday.

"It's so up in the air right now," said Del. Christopher B. Shank, R-Washington.

The Senate approved a $22.6 billion spending plan Friday that relies on slot-machine gambling and increases in corporate taxes and fees along with an increase in the smokeless tobacco tax.


The House budget foregoes slots in favor of even higher corporate fees and deeper cuts to the budget, including higher education.

Del. Norman H. Conway, D-Eastern Shore, the Appropriations Committee's vice chairman for nearly a decade, said the gulf between the two chambers is unusually large this year.

"That's the art of compromise," he said.

Both chambers do agree on some budget solutions. Those include:

  • Increasing the state property tax by 5 cents, which would cost the average Washington County homeowner about $70 a year.

  • Imposing a 2 percent premium tax on Managed Care Organizations and Health Maintenance Organizations plans to raise $48.9 million. Indemnity health insurance plans already pay the tax.

  • Eliminating about 1,800 vacant positions in state government, for a savings of $20 million.

The remaining differences are wide.

The Senate wants to cut $30.6 million from the Teacher Salary Challenge grants to local school systems while the House proposes a $15.3 million cut.

The House wants to cut $40.1 million for higher education while the Senate proposes a $2.1 million cut.

The House advocates raising $125.7 million through increased filing fees while the Senate wants $47.7 million in added fees and a 10 percent corporate income tax surcharge for one year.

The Senate has proposed an increase in the tobacco tax rate for products other than cigarettes. Increasing the rate from 15 percent to 45 percent of the wholesale price would generate about $16.2 million.

The Senate would eliminate the Heritage Tax Credit for commercial projects to save $22.8 million next year.

The biggest sticking point seems to be slot machines, which are backed by Ehrlich and Senate President Thomas V. Mike Miller.

Slot machines would bring in only 15 million in fiscal 2004, but backers see them as a big step toward filling future budget deficits.

Even with slot machines, budget analysts are predicting a $700 million budget hole in fiscal 2005.

That's why some legislative leaders, including slots foe House Speaker Michael E. Busch, D-Anne Arundel, say the state needs to look at a broader tax increase to make ends meet.

Ehrlich has ruled out any increase in sales and income taxes.

"There's a dozen scenarios in terms of how it could go," said Del. Robert A. McKee, R-Washington. "The big players have staked out rather rigid positions. When you start tying slots to tax increases, do you get both or neither?"

Informal budget talks were to begin today among members of a conference committee between the two chambers.

Del. George Edwards, R-Garrett/Allegany, said he hopes a compromise can be found before April 7 so the session doesn't have to run long and cost taxpayers even more money.

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