MARYLAND'S OVERALL economic health is excellent. Job growth is above the national average, unemployment is below, and income and sales tax revenue has been outpacing expectations. Maryland has a rainy-day fund of $500 million; it is one of just seven states whose bonds are rated AAA. The improving economy and robust revenue figures have dampened some of the urgency in discussions of the state budget shortfalls. Initial projections of an $800 million deficit in the fiscal 2006 general fund budget of $12.1 billion have been scaled back; the current projection is for a $250 million deficit.
But Gov. Robert L. Ehrlich Jr. (R) is also right that Annapolis faces fiscal challenges. The state's future is one of ballooning deficits, largely the result of a sizable tax cut enacted in the late 1990s; soaring Medicaid costs; and a huge, long-term boost in spending on schools that was approved in 2002. According to the latest projections, even with the recent good news factored in, Maryland's general fund expenses of $13.8 billion in fiscal 2008 would exceed its revenue by $1.4 billion.
The governor and his aides have offered up slots as just the medicine for what ails Maryland's budget and warned of calamity should the state's House of Delegates continue to thwart the governor's will. Slots in Maryland started off as a means to rescue the state's struggling racetracks, morphed into a panacea for covering higher schools spending, and now it seems mainly to be a pawn in an intricate game of blame-shifting between Mr. Ehrlich and his supporters and rivals in the General Assembly. On Thursday, state Senate President Thomas V. Mike Miller Jr., a Democrat who supports slots, warned his own party that it will be blamed for draconian budget cuts unless it gets on board the Republican governor's slots bandwagon. Mr. Ehrlich must be delighted at this Democratic lurch toward fratricide.
Throughout, we have opposed slots because of their likely cost in crime, corruption, seediness and social problems. But a hard look at the relief promised by slots suggests they may not be the panacea Mr. Ehrlich would have Marylanders believe. His prediction that slots would yield $900 million in annual revenue seems like wishful thinking. More sober estimates, including some from independent experts, range closer to $600 million to $700 million, and those figures predate the tougher competitive climate for gambling ushered in by neighboring Pennsylvania's recent decision to authorize tens of thousands of slot machines. When revenue from 15,000 slot machines falls short of projections, will Mr. Ehrlich then plead for 30,000?
The governor has done a good job of trimming state outlays, and he vows further cuts in the future. But he has ruled out higher taxes to cover the projected deficit, arguing that Maryland is already a high-tax state. In fact, it is not. According to the nonprofit Tax Foundation, Maryland's combined state and local tax burden, measured as a percentage of income, ranked 24th among the states this year, down from 16th in 1984. Like plenty of other states, Maryland does face a budget shortfall and hard choices. But there is every reason to look skeptically on the idea that slots are a cure-all, and to remain open to alternative forms of new revenue.