- The Washington Times - Thursday, November 16, 2006

ANNAPOLIS — Maryland legislators said yesterday tax increases are not needed to cover a budget shortfall this year but likely will be considered by the Democratic-controlled legislature in 2008 to close the long-term gap between spending and revenues.

“I don’t know if you can resolve the longer-term problem without new revenues or a significant change in the state’s commitments,” said Sen.-elect Richard S. Madaleno Jr., Montgomery Democrat.

Mr. Madaleno, a former budget analyst who most likely will serve on the influential budget and tax committee, also said Gov.-elect Martin O’Malley’s first-year budget can be passed without major changes.

State budget analysts said Wednesday that Maryland is facing a nearly $500 million deficit for the current fiscal year and will face a $1.3 billion deficit in fiscal 2008, which begins July 1.

“While things are looking bleak, or at least challenging, on the revenue side, the spending side is going beautifully,” said Warren Deschenaux, the state’s chief budget analyst.

Aides to outgoing Gov. Robert L. Ehrlich Jr., a Republican, said the “long-term structural deficits” are the result of required spending programs, including the Thornton education plan, which were passed by the legislature without guaranteed funding.

Mr. Ehrlich often boasted on the campaign trail that he inherited a $4 billion deficit from previous Gov. Parris N. Glendening, a Democrat, and turned it into a $2.5 billion surplus.

The current budget “is actually in pretty good shape,” David Romans, the state’s operating budget manager said Wednesday.

“I think through this session, we’re fine,” said House Speaker Michael E. Busch, Anne Arundel Democrat.

Mr. Ehrlich achieved the budget turnaround by riding a strong economic wave and through a mix of raising fees and property taxes, cutting spending and using money earmarked for transportation and land preservation.

However, in the long term, the state has committed to spending more money than it is scheduled to receive, which budget analysts refer to as the long-term structural deficit.

“They’ve made a lot of promises, and if they’re going to keep those promises … I think it’s more likely than not that they will attempt to raise taxes,” said House Minority Whip Anthony J. O’Donnell, Southern Maryland Republican.

Mr. Madaleno said one option would be “some sort of significant readjustment in the way we tax economic activity, which right now is almost exclusively through the sales tax.”

“Everything from legal services to dry cleaning is currently not taxed,” he said. “You could come up with something like a gross receipts tax that essentially ends up just capturing a lot more economic activity.”

The deficit also will reinvigorate supporters of legalizing slot machines in the state, a major initiative for Mr. Ehrlich that he tried and failed to push through the legislature.

“I’m not for tax increases,” said Senate President Thomas V. Mike Miller Jr., Southern Maryland Democrat. “I’m for slots.”

However, such a debate would divide the overwhelming Democratic majority.

“I think it’s going to be a tough sell,” said Sen. Brian E. Frosh, Montgomery Democrat. “It would be tough to get the votes for it.”

O’Malley spokesman Rick Abbruzzese yesterday reiterated the governor-elect’s support for limited slots at horse-racing tracks to help preserve the industry.

But Mr. O’Malley does not view slots as a revenue source, Mr. Abbruzzese said.

Mr. Busch, a strong opponent of slots who worked to defeat Mr. Ehrlich’s efforts, doesn’t think the new administration will make slots a major issue.

Mr. Miller disagreed, saying Mr. O’Malley is “going to work hard to get it passed.”

Mr. Busch also said the state’s financial commitment to counties is another potential place to cut state spending.

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