Maryland lawmakers said yesterday that they would consider a fresh round of tax increases and spending cuts to eliminate a budget shortfall now projected to reach nearly $2 billion by June 2004.
Legislators appeared a long way from reaching a consensus on how to act. But leaders in the General Assembly said the latest bad news on the budget delivered Monday -- that tax receipts are expected to drop by an additional $200 million -- may force them to adopt measures considered unlikely as recently as last week.
Senate President Thomas V. Mike Miller Jr. (D-Prince George's), who in the past has been reluctant to talk tax increases, signaled that he might change his mind. He said senators were growing weary of spending cuts.
"I don't believe there's a sentiment for more devastating cuts," he said. "We're going to have to look for more revenue somewhere, and I hope the governor cooperates. We'll see."
Some lawmakers are considering combining a tax increase with a proposal for legalizing slot machines to ensure that Gov. Robert L. Ehrlich Jr. (R) signs off on the deal. That plan, though, could meet resistance from anti-gambling lawmakers, particularly House Speaker Michael E. Busch (D-Anne Arundel).
Until now, the biggest damper on any discussions about taxes has been Ehrlich's vow to veto any increase in the sales or income tax .
Ehrlich has been counting on upfront fees from slot machine gambling to save the state from its fiscal problems. But slots alone won't do the job, according to his administration's own estimates.
Yesterday, Ehrlich said the growing budget gap "certainly gives another boost to slots, I think." Otherwise, he said his approach to erasing the deficit remains largely unchanged: "It's slots, more cuts and very little in the way of [new] taxes."
His remarks came as state fiscal leaders announced that tax collections are continuing to plummet because of a weak national economy and such local problems as the recent snowstorm that shut down commerce for nearly a week.
Ehrlich and his predecessor, Parris N. Glendening (D), had already proposed closing a $550 million budget gap this year with a hiring freeze, spending cuts and one-time fund transfers. For next year, Ehrlich planned to erase a $1.2 billion shortfall with the help of nearly $400 million in revenue from slot machine gambling -- an amount he has since cut in half.
With the new revenue estimates, legislative fiscal analysts said Ehrlich would need to find another $50 million this year and at least $380 million the next year.
Ehrlich said he still would not consider an increase in sales or income tax rates. But he said he was willing to talk about options as long as both the Senate and House of Delegates agree that cuts must come first.
His aides also suggested he might take a more flexible approach. "It's compromise time in Annapolis, and I think everybody knows that," said Paul E. Schurick, Ehrlich's communications director.
Although the Democratic legislature is talking about the need for higher taxes, leaders are wary of pushing such measures for fear that Ehrlich will wield his veto power and attack them politically.
Busch said the state's finances are projected to be so dismal over the long term that a one-cent increase in the sales tax rate is probably necessary. But he said the House wouldn't push the idea unless Ehrlich agreed to it first.
"From my standpoint, there's no reason to have a sales tax increase unless you have a veto-proof majority," he said. "And we don't. It's a futile exercise."
Del. Howard P. Rawlings (D-Baltimore), chairman of the House Appropriations Committee, said lawmakers may use $115 million from the state's rainy day fund as a partial solution, but he also hinted at combining a sales tax increase with a slots proposal.
"That's the only thing that's going to work," he said. "That's the reality. You can't do one without the other."
If the General Assembly tries to tie slots and taxes together, Ehrlich said he would consider the proposal "depending on what the tax package looks like."
But other House Democrats said such a strategy could backfire. Del. Peter Franchot (D-Montgomery) said if House members embraced any kind of sales tax increase without Ehrlich's blessing ahead of time, the governor might double-cross them and turn taxes into a potent campaign issue.
] "It's a double trap, and I don't think the [House leadership] will fall for it," he said. "The governor will talk about nothing other than tax-and-spend Democrats. The idea that we should lead with our chin will result in a lot of defeated Democrats three years from now."
Although Ehrlich is strongly backing slots as a financial solution, his gambling plan has made no headway in the legislature. He released the basics of his proposal last week, but his staff still hasn't finished fleshing out the details, much to the frustration of his pro-slots allies.
Miller said he was tired of waiting for Ehrlich and has appointed Sen. Edward J. Kasemeyer (D-Howard) to head a new subcommittee whose sole task will be to work on slots.
Still, Miller said he is not wavering on his support: "It's going to happen. Slots are going to happen," he said. "It just means hard work."
Staff writer Lori Montgomery contributed to this report.