ANNAPOLIS — Gov. Robert L. Ehrlich Jr., citing a state budget surplus he said now exceeds $1 billion, has raised the prospect of using some of that money next year to reduce taxes.
“We’ll be looking at some ways to put some dollars back in your pocket,” Mr. Ehrlich, a Republican, said during an appearance on a morning talk show Tuesday on WBAL Radio in Baltimore.
He did not offer any specifics on which taxes might be reduced.
Mr. Ehrlich pegged the surplus for the fiscal year that ended June 30 at more than $1 billion. About $250 million has been put into the state’s rainy day fund, which the governor said he will not touch next year.
Another $250 million has been appropriated to balance the budget, leaving about $500 million for future use.
Mr. Ehrlich said he has tried to reduce the state property tax, but that his proposal was rejected by the two other members of the Board of Public Works, Comptroller William Donald Schaefer and Treasurer Nancy K. Kopp, both Democrats.
The governor initiated a rate increase of about 5 cents per $100 of assessed value during his first year in office to help balance the budget. He said at the time that he would reduce the rate to its previous level, but he has not included money in the budget the past two years to accomplish that.
House Speaker Michael E. Busch, Anne Arundel County Democrat, said the House of Delegates tried to set aside money in the budget during the 2005 legislative session to return the rate to its historic level.
Mr. Busch said the administration opposed the plan and that James “Chip” DiPaula Jr., then the governor’s budget secretary and now his chief of staff, described it as a gimmick.
Mr. DiPaula said Mr. Ehrlich “wants to reduce taxes and welcomes the speaker’s help in reducing taxes.”
“He appreciates the speaker’s change of heart,” Mr. DiPaula said. “Just a year ago, the speaker passed a billion-dollar tax increase through his chamber.”
Although Mr. Ehrlich has kept his 2002 campaign promise not to increase the sales or income taxes, the General Assembly’s Department of Legislative Services compiled a list of fee increases initiated by the governor totaling about $300 million per year.
In addition, the property tax increase is bringing in more than $200 million a year, Mr. Busch said.
“You’re up to $500 million in taxes and fees,” the speaker said. “The idea that the governor has not raised revenues or that state government has not increased is not true.”
Mr. Busch and Mr. Ehrlich agreed that despite the good financial news, Maryland faces fiscal challenges next year — an election year.
Funding for public schools will increase by about $425 million just to comply with levels mandated by law. The cost of the Medicaid program also is expected to continue to increase dramatically.
Mr. Ehrlich was asked during the WBAL program whether the state still needs slot machines now that it has a big budget surplus.
“I’ve never viewed slots as a fiscal issue,” he said. “I’ve never talked in the context, ’Gosh, we need this. We have a budget deficit.’”
But when Mr. Ehrlich was running for governor, revenues from slot machines were a major part of his plan to balance the budget without taxes.
He and Mr. DiPaula also have testified before legislative committees that slot machine revenues were needed to pay for future increases in school aid.
This year, as the economy was improving and revenues were increasing, Mr. Ehrlich proposed using slot machine revenues for school construction.
Mr. DiPaula said the slot machine proposal “initially was a fiscal issue until this surplus was created.”
“He then recognized it as a way to help fund the thoroughbred industry,” he said.
He said Mr. Ehrlich has a history dating back to his years in Congress of supporting slot machines as a way to help the racing industry.
Mr. Busch said Mr. Ehrlich “must be suffering from amnesia … to suggest he’s never tied slot revenues to budget issues.”
“He’s made slots a big revenue issue,” the speaker said. “Slot machines have always been the magic elixir for everything that needed funding.”
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