ANNAPOLIS, SEPT. 2 -- Controversy is a constant companion to horse racing in Maryland, it seems, and state government's latest encounter with the racing industry only reaffirmed that.

The latest chapter, which involves a proposal for intertrack betting, came today when Maryland racing magnate Frank De Francis said he intends to increase public ownership of the thoroughbred tracks he controls -- so long as he maintains majority interest -- or sell the tracks to the state, an idea the state's political leadership quickly dismissed.

De Francis said he felt his identification with the racing industry may have harmed the chances of his intertrack betting proposal for Laurel and Pimlico race tracks.

But the more likely reason that De Francis' proposal ultimately failed is because perception and politics became more important than the value of his idea. And as controversies go, this one had the elements of a classic:

There was a power broker who was a friend and political ally to the governor and other key politicians. There was a request for "emergency" regulations, even though only the industry claimed an emergency existed. There was an attorney general's opinion that was openly criticized as being overly partial to the industry. There was a questionable campaign contribution. There was a sudden change of heart by a legislator who opposed the plan initially.

Before De Francis' proposal was ultimately denied, reputations were sullied, legislative leaders feared for the integrity of the process and an idea that many thought would be beneficial to the industry and the state was abandoned.

"I think perception really is important," said Del. Daniel M. Long (D-Somerset), a member of the legislative committee that considered the racing proposal. "And the perception here is just horrible in terms of the legislature, in terms of the administration and in terms of the racing industry."

De Francis today called the episode a "debacle" and said he felt the problem was that both the public and the legislature believe that he is the only one to benefit from concessions made to racing. "The theme is always 'De Francis wants,' and that troubles me," De Francis said at a news conference in Laurel today.

A former Cabinet secretary who controls the state's thoroughbred racing industry, De Frances had no details on how he would increase public ownership of the tracks, saying he will soon begin "exploring the multitude" of options.

He brought up the issue of state ownership with Gov. William Donald Schaefer, House Speaker R. Clayton Mitchell (D-Kent) and Senate President Thomas V. Mike Miller Jr. (D-Prince George's) at a meeting Tuesday afternoon. Schaefer said the state has "no intention or interest" in buying a race track, and Miller described the meeting more as a "therapy session" for De Francis than a serious discussion of the state's interest.

Miller also was skeptical of De Francis' offer to go public. "He knows and I know that about the only time a closed corporation goes public is when there is a cash flow need," Miller said.

Still, Miller said he thinks De Francis is one of the "premier" promoters of racing in the nation and praised his efforts at revitalizing the industry. The problem with De Francis' intertrack betting proposal, Miller said, was that he labeled it an emergency.

The Administrative, Executive and Legislative Review Committee, a group of senators and delegates that reviews emergency regulations from state agencies, initially approved De Francis' proposal for a system by which patrons at Laurel Race Course could watch and wager on races being run at Pimlico, 30 miles away. De Francis jubilantly called the 8-to-7 vote a "photo finish."

But on Monday, Miller and Mitchell nullified the committee's decision. A ruling by the committee's cochairmen that a member absent from the meeting could vote in favor of the proposal was illegal, they said. The proposal thus failed on a 7-to-7 tie vote.

The proposal had been controversial from the start. Department of Licensing and Regulation Secretary William A. Fogle Jr. denied De Francis' request for simulcasting and then approved it when it was resubmitted this summer.

Members of Fogle's staff had questioned whether a 1984 law allowing telephone betting was broad enough to include the simulcasting idea.

But in July Fogle agreed with De Francis and the Maryland Racing Commission when the resubmitted proposal was deemed an "emergency" so that De Francis' experiment could start when the new Pimlico season begins on Tuesday.

There was immediate criticism from legislators, who questioned whether the request qualified as an emergency and whether simulcasting was envisioned in the 1984 law.

Attorney General J. Joseph Curran, in what he termed a "close call," said simulcasting was allowed under the law, and the racing commission was free to approve De Francis' request. That opinion was publicly criticized, too.

"He was stretching his opinion to meet the needs of the department," said Sen. James Simpson (D-Charles) one of the cochairmen of the committee.

Simpson and the other cochairman, Del. Larry Young (D-Baltimore), also became part of the controversy.

Just before the committee's scheduled vote, Young, who is running for president of the Baltimore City Council, received a $1,000 donation from Tom Manfuso, who is part owner of the tracks with his brother and De Francis. To add to the intrigue, the check was delivered to Young campaign headquarters by Del. Paul Weisengoff (D-Baltimore), an adviser to the campaign of one of Young's rivals and a leading advocate of the horse racing industry in the General Assembly.

Young's campaign manager said he returned the money when he learned that Manfuso was part owner of the race tracks.

Weisengoff, a master of legislative gamesmanship, has said he was only performing a favor for Manfuso and denied that delivery of the check was intended to compromise Young.

Manfuso said in an interview before the vote that a lawyer friend active in the Young campaign, whom he would not identify, had asked him to contribute to the campaign. Manfuso gave the maximum allowed, but said he didn't intend for it to influence Young.

In the end, Young abstained from voting, on the advice of House Speaker Mitchell. He said later he probably would have voted against the measure.

Simpson, on the other hand, shocked those in the audience by voting for the proposal. Simpson had roundly criticized the idea for weeks, and early in the meeting he called the proposal an "affront" to the legislature and the citizens of the state. "I knew there was going to be a perception of 'Jesus Christ, who got to Simpson?' " he said.

But Simpson said he was persuaded during the meeting that the attorney general's opinion gave the industry the right to ask for the proposal, and that a vote against the emergency regulations would only delay, not cancel, their implementation.

He most likely is right. De Francis said he will resubmit the simulcasting idea through the normal bureaucratic route, which could take up to four months but does not require legislative approval. Next spring, patrons probably will be able to drive to the plush Sports Palace at Laurel and watch and wager on races being run at Pimlico.

Miller contends that the legislature has never really discussed the idea of simulcasting races from one track in the state to the other, and says it will be an issue for the 1988 legislative session.

But he agreed that De Francis' idea for Pimlico and Laurel is a good one, as do Schaefer and most of the legislators who voted against De Francis on the committee.

De Francis, who said he still doesn't fully understand why his proposal failed, understands one thing. "Whatever we did, we didn't do it right," he said.