- The Washington Times - Wednesday, February 2, 2005

ANNAPOLIS — House Democrats yesterday proposed tapping the state’s rainy day fund to pay for $100 million in school construction, a move aimed in part at thwarting Gov. Robert L. Ehrlich Jr.’s slot-machine gambling plan for the third consecutive year.

In addition, Democrats called for repealing a $166 million property tax increase that Mr. Ehrlich imposed in 2003. The property tax repeal also would be covered with money from the state’s nearly $800 million rainy day fund.

“We’re responding to what we believe Marylanders want most,” House Speaker Michael E. Busch, flanked by other House Democrats and county leaders, said during a State House press conference.

Mr. Ehrlich, a Republican, noted that he already has set aside $157.4 million for school construction in the state’s $947.5 million capital construction budget. He also said the state Board of Public Works, which he heads, will work to repeal part of the tax increase “within the next month or two.”

“I don’t think it’s a very good policy,” he said of the House proposal. “I don’t think it will survive the Senate.”

Mr. Ehrlich said Mr. Busch is doing “anything to take attention off slots.” The governor’s slots bill, which calls for using gambling revenue for education, has died in the House for the past two years.

“If we pass slots tomorrow, you wouldn’t have any funding for a couple of years,” Mr. Busch, Anne Arundel County Democrat, said during yesterday’s press conference.

Senate President Thomas V. Mike Miller Jr., a Prince George’s County Democrat and supporter of slots, said the state must emerge from the current recession before taxes can be cut.

“The governor was right to increase property taxes two years ago,” said Mr. Miller, who did not attend the House Democrats’ press conference. “We are going to find a way for school construction funding.”

According to a state task force, Maryland schools are deteriorating and new schools are needed. The task force estimated that it would cost $3.85 billion to bring every school up to minimum health and safety standards.

Calls for increasing school construction funding and cutting taxes put Democrats in the spotlight with two of Mr. Ehrlich’s key issues. He had promised to add another $100 million for school construction if his slots bill is passed this year.

“It is time to get a [slots] bill done,” Mr. Ehrlich said. “What the legislature has done over several years is not stop one single Marylander from playing slots. It has just stopped Marylanders from playing slots in Maryland.”

Mr. Ehrlich said he increased the property tax to establish “truth in budgeting.”

The state constitution requires that property tax revenue be used to pay off bonds, but past Democratic governors used the general fund for debt service to avoid raising the property tax rate for more than two decades.

House Democrats said they are seeking an additional $60 million for school construction by closing a loophole that allows commercial property buyers to avoid paying the state transfer tax.

Mr. Ehrlich has promised to veto that effort. “It is a flawed bill and everybody knows it,” he said yesterday.

A bill that would have closed the loophole died in last year’s session.

According to the General Assembly’s Department of Legislative Services, repealing the property tax would save the owner of a $400,000 home about $200 a year. Most of the property tax revenue goes to local jurisdictions.

Maryland law requires an annual contribution of at least $50 million to the rainy day fund regardless of the state’s fiscal condition. The governor can transfer rainy day funding only if authorized by the General Assembly or by the budget.

The rainy day fund currently holds more than bond houses — such as Moody’s and Standard & Poor’s — need to reaffirm Maryland’s coveted AAA bond rating.

Last month, the legislature’s chief fiscal adviser said Mr. Ehrlich’s proposed $25.9 billion budget “doesn’t provide durable solutions to the fact that our revenues don’t match our desire to spend.”

Warren Deschenaux, director of the Office of Policy Analysis, also predicted that the deficit facing lawmakers in fiscal 2007 will be about $850 million.

Democratic leaders have told The Washington Times they will not seek any tax increases this session, after having levied a tax on health maintenance organization premiums. HMOs have said they will pass that tax on to their customers.

• This article is based in part on wire service reports.

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