O'Malley's Office Backs Off New Technology

Battle Over Computerized Method Is Latest Clash Between Governor, Franchot

Maryland Gov. Martin O'Malley's office has put the brakes on the procurement of a costly tax collection system that is a priority for Comptroller Peter Franchot, the latest reflection of tension between the two Democrats.

Both offices agree that the computerized system, which would replace 20-year-old technology being used by Franchot, probably would generate additional tax dollars for the state.

But in a memo obtained by The Washington Post, O'Malley's chief of staff, Michael R. Enright, questions whether the state can afford the $87 million contract given its budget difficulties. Enright also says that Franchot has not given adequate notice to county governments of the more than $20 million that they would contribute to the project's cost.

"Delaying a project as large as this one until we have a better handle on how it will be funded would be prudent," Enright wrote in his memo to other O'Malley administration officials.

The sparring over the tax collection contract is the latest flare-up between Franchot and O'Malley, who are separately elected statewide officials. The two Democrats are on opposite sides of Maryland's slot machine gambling debate, with Franchot leading the campaign against the slots proposal on Tuesday's ballot.

The Board of Public Works, a three-member panel on which O'Malley and Franchot sit, was scheduled to vote on the tax collection contract Wednesday. It was pulled from the agenda this week at O'Malley's request.

Yesterday afternoon, a Franchot spokesman called Enright's intervention "highly irregular."

"His stated desire to indefinitely postpone a revenue-generating project due to budgetary concerns stretches the limits of logic and credibility," Franchot spokesman Joe Shapiro said in a statement. "The state of Maryland is at a moment in time when it cannot afford to cut off its nose to spite its face."

Shapiro also questioned why counties would object to helping fund a system that would increase their tax collections. In Maryland, the state collects income taxes assessed by the state and county.

In an interview yesterday, David Bliden, executive director of the Maryland Association of Counties, said he was troubled that he had not been informed of Franchot's plans.

"It's perplexing to get the news of a $20 million reduction from the media," Bliden said. "This should be part of a conversation."

An e-mail sent this week from a Franchot aide to an O'Malley aide suggests that Franchot's office planned to tell counties about the cost after the contract was approved.

"When we have a contract, then the locals will be apprised of how they will participate (via a reduction in their income tax distribution)," Franchot aide Jerry Klasmeier wrote to O'Malley aide Thomas Hickey in an e-mail obtained by The Post.

"Given the difficult fiscal climate we are in, letting [the counties] find out about this after the fact serves no ultimate purpose," Enright wrote.

The new tax collection system is part of a broader initiative by Franchot that also includes hiring more auditors to increase compliance with Maryland tax laws. The General Assembly has approved an initial $10 million for the project, which would be funded over six years.

Franchot's office says the project would eventually generate $80 million to $100 million a year in revenue for the state.