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Slots pay education { January 31 2003 }

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January 31, 2003

Slots bill pledges funds for schools
By S.A. Miller

ANNAPOLIS — Republican Gov. Robert L. Ehrlich Jr. presented a legalized-gambling bill yesterday to the General Assembly that pledges that 64 percent of the profit will go toward public education. Top Stories
The proposed 10,500 slot machines are key to Mr. Ehrlich's budget plan to reduce the $1.3 billion shortfall without increasing taxes or ordering massive layoffs for state workers.
The state-regulated machines would operate in four Maryland racetracks that would stay open from 8 a.m. to 2 a.m. every day. Mr. Ehrlich expects the machines to generate about $1.2 billion a year, which would be split among the state, track operators, local governments and racing interests.
"The governor's bill goes a long way toward establishing a sustainable and reliable source of new revenue," said Budget and Management Secretary James "Chip" DiPaula yesterday.
Mr. Ehrlich has said slots in the state are a way to fund education, stop Maryland dollars from going into slot machines in West Virginia and Delaware, and bolster the state's beleaguered horse-racing industry with larger racing purses.
Meanwhile, Democrats opposed to slots said yesterday that they have enough House votes to delay Mr. Ehrlich's legislation for a year. They want deeper cuts and more taxes on corporations instead of reliance on slot machines to generate the $395 million needed during the next 18 months to aid the budget.
Mr. Ehrlich has staunchly opposed most proposed tax increases and warned that without revenue from slots the state will suffer drastic cuts in such vital services as aid to the poor and the disabled.
Delegate Peter Franchot, Montgomery Democrat, said that he had 71 sponsors — a House majority — for a bill that would impose a year-long moratorium on slots legislation. All the sponsors are Democrats, including most leaders in the Democrat-controlled House. About 20 Republicans also pledge support but did not sign the petition out of loyalty to the governor, he said.
Mr. Franchot did not provide the list of sponsors but said he would introduce the bill today.
He co-sponsored a bill two years ago to legalize slot machines and has said that he is not morally opposed to gambling. He, however, opposes Mr. Ehrlich's plan.
"We have a Republican governor who has decided to say no to taxes," he said. "Without taxes there is no way to fund education and transportation. Slots is not a substitute for taxes."
House Speaker Michael E. Busch, Annapolis Democrat and leading slots opponent, said the gambling revenue could be replaced with $200 million from stricter corporate tax laws and $200 million in deep cuts that would spare education and layoffs.
"You have to make tough decisions on cuts and find other revenue sources," he said.
An Ehrlich administration spokesman said that the governor still believed he has enough votes for the bill to pass in the House and the Senate, despite Mr. Franchot's proposed moratorium.
"Nothing has changed," said Henry Fawell, the spokesman. "The governor fully intends to work with the legislature to get a meaningful slots package that helps realize his goals."
After weeks of speculation about the content of Mr. Ehrlich's proposal, the bill contained few surprises and closely resembled the proposals he made in the past year while campaigning heavily on legalizing slot machines to help balance the budget.
The bill revived his earlier pledge to put revenue from slots into public schools. He kept the slots revenue out of the general fund and earmarked it for schools by creating an Education Trust Fund for the state's slots earnings.
The slots revenue would be divided eight ways:
•The Education Trust Fund would get 63.9 percent.
•The horse track operators would receive 24.8 percent.
•The purses for horse races would get 5.8 percent.
•Local government where the tracks would be located would gain 3 percent of the profit generated at their individual tracks.
•The Maryland Bred Race Fund and Maryland Standardbred Race Fund would get 1.4 percent.
•Timonium Fairgrounds in Baltimore County would receive 0.8 percent, and Ocean Downs Racetrack near Ocean City would get 0.3 percent.
•A fund for gambling-addiction services would get $500,000 annually.
Tim Capps, executive vice president of the Maryland Jockey Club, which owns a minority interest in the Pimlico and Laurel tracks, said the state seemed to be taking a larger share of the profits compared with West Virginia and Delaware.
"It looks like the state's percentage ... is extraordinarily high," he said, adding that track operators would have to study the bill before taking an official position, but they appreciated the governor's effort to help the industry.
Licensing fees that track operators would pay to the state would help close the $1.3 billion shortfall in the budget year beginning July 1. Mr. Ehrlich's budget relied on $395 million from slots — $350 million from licensing fees and $45 million for revenue the first year — to balance the budget without increased taxes or layoffs.
The state would authorize 3,000 slot machines each for Pimlico, Laurel and Rosecroft, with the tracks paying $100 million as an upfront licensing fee. Little Orleans, a horse track under construction in Allegany County, would get 1,500 machines for a $50 million fee.
The slot machines will be monitored by state inspectors at the tracks and by a computer system that records every game and every payoff.
Mr. Ehrlich's bill also would lead to replacing the Maryland Racing Commission and the Maryland Lottery Commission with a single commission to oversee racing and the lottery games.

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