- The Washington Times - Friday, September 27, 2002

BALTIMORE Lt. Gov. Kathleen Kennedy Townsend yesterday presented a budget that promises not to increase the state income tax while erasing an estimated $1.3 billion budget deficit next year.

The Democratic gubernatorial candidate's plan does call for raising Maryland's $1-per-pack cigarette tax already the fourth-highest in the country by an additional 36 cents. It also depends heavily on one-time revenue sources that would leave the state in another budget hole if the economy does not begin to rebound next year.

"This is a real plan. It can be done," Mrs. Townsend said, presenting her budget blueprint at a news conference at the Wyndham Hotel in Baltimore. "We will not raise taxes, except for the possibility of a tax on tobacco."

Last week, the lieutenant governor refused to rule out higher taxes when her Republican opponent, U.S. Rep. Robert L. Ehrlich Jr., presented his budget with the promise of no new taxes. At that time, she said it would be irresponsible to take any revenue option off the table.

Mrs. Townsend's plan is more detailed than the "budget framework" offered by Mr. Ehrlich. She referred to her opponent's plan as "a paper-napkin exercise" that uses accounting techniques reminiscent of the Enron or WorldCom accounting debacles.

Mr. Ehrlich's campaign was unavailable for comment.

Former Republican state Sen. Martin Madden, who helped develop Mr. Ehrlich's budget, said the Democratic proposal is "just more of the Glendening-Townsend budget approach of borrowing from our future that got us in the trouble we're in now."

Mr. Madden said Mrs. Towsend's plan would leave Maryland facing another huge deficit in two years, but Mrs. Townsend said that by almost every measure, Maryland is in better financial shape than most other states and "is poised to take off when the economy recovers."

While Mr. Ehrlich's budget relies heavily on anticipated revenue from legalizing slot machines at horse-racing tracks, Mrs. Townsend's plan looks to cash in on some of Maryland's share of the national tobacco settlement.

Mrs. Townsend proposed selling nine years' worth of the $151 million annual settlement payment to a bond house for 72 cents on the dollar. She would sell 10 percent of the payment, or $15 million a year, for a lump-sum payment of about $100 million. The money would help close the $414 million gap projected for fiscal 2003, which began July 1.

She would consider selling another 30 percent, or about $45 million a year, for $300 million to help bridge the $1.3 billion shortfall next year. The remainder of the payment, or $55 million a year, would be enough to fully fund the tobacco-crop replacement and health care programs originally designated to receive the settlement money.

Maryland is scheduled to receive payments from the settlement with cigarette makers for the next 22 years.

To shore up the budget shortfall anticipated in fiscal 2003, the plan calls for immediate spending cuts, such as deferring $50 million worth of procurements, firing consultants and stopping all out-of-state travel.

Mrs. Townsend has approached Gov. Parris N. Glendening about making some of the cuts now, but she said the governor gave her no assurances. The budget assumes the cuts would be made when she takes office in January, Mrs. Townsend said.

The remaining $1.3 billion shortfall in fiscal 2004 will require "painful cuts," such as slowing the growth of spending on higher education by $12 million, Mrs. Townsend said. She promised not to cut or curb spending on K-12 education or public safety, but all other programs would be subject to a spending freeze.

In another matter, Mrs. Townsend said Mr. Glendening has clouded the reputation of the state university system by appointing his friends to the Board of Regents.

Mrs. Townsend told the Baltimore Sun on Wednesday she would change the selection process for regents if elected to succeed Mr. Glendening.

"You don't want the Board of Regents to be chosen, to have the appearance that it is chosen, solely because it is the governor's friends," she said. "You want to believe you are choosing the best people."

Critics have charged Mr. Glendening with politicizing the regents board by appointing allies with few apparent qualifications.

The issue reached a climax late last year as the 17-member board composed entirely of Glendening appointees was considering naming the governor to the $375,000-a-year chancellorship of the University System of Maryland.

Mr. Glendening withdrew his name amid an uproar from former regents, ethics experts and university donors. Many said it was inappropriate for him to be seeking a position filled by regents he had appointed.

"I think a lot of questions have been raised," Mrs. Townsend said. "I think it's very important to bring a sense of order and faith in the Board of Regents."

This article is based in part on wire service reports.

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