As lawmakers jockey over whether to expand gambling in Maryland, they have drawn increasing attention to the state’s young Education Trust Fund.
That’s because a major component of the case made by supporters is that additional gaming — via a sixth casino in Prince George’s County and approval for table games — could boost the coffers of the fund, which was established in 2007, by as much as $223 million.
While the trust fund has been touted as a major source of state education money, some argue that it’s merely being used as a funding placeholder and that it simply supplants other education aid. They want the trust fund to increase education spending.
Set up under the initial legislation authorizing slots in Maryland, the Education Trust Fund receives the licensing fees from the state’s casinos as well as 48.5 percent of gross gaming revenue. The fund is used for state education aid to local jurisdictions.
In fiscal 2013, the trust fund is expected to see $254 million from slots revenues, plus another $24.6 million in licensing fees from planned casinos in Baltimore city and Allegany County, according to the Department of Budget and Management.
Casinos must pay an initial license fee of $3 million for every 500 slot machines they operate.
That money will go toward the $5.9 billion budgeted for state education aid, according to state analysts.
As in previous years, however, because there’s been no change to the formula used to calculate education aid, the fund will offset an equal amount of money that will revert to the general fund to be spent elsewhere, according to state analysts.
Tracking where that general fund revenue goes isn’t really possible, said Marc Nicole, director of budget analysis for DBM, but the school funding has been steady. “The governor has made a commitment to funding [education] and has met that commitment,” Nicole said.
Since its inception in fiscal 2010, the fund has only been used to fund K-12 education, and couldn’t be allocated elsewhere without a special provision in the annual Budget Reconciliation and Financing Act, according to the governor’s office.
But some say the fund isn’t being used to its full potential.
“[The fund is] an accounting gimmick,” said Neil Bergsman, director of the nonprofit Maryland Budget & Tax Policy Institute. “A sort of financial sleight-of-hand trick.”
The fund allows the state to show that every penny of slots revenue has gone to fund education, as the law requires, but without actually increasing spending, Bergsman said.
Nonetheless, the governor and legislative leaders had followed through on their promises to maintain funding, and education had weathered the weak economy better than other sectors. “They’ve put their money where their mouth is,” Bergsman said.
Bergsman argues that the state should adjust the amount of per-pupil spending in what’s known as the Thornton Plan — the formula used to calculate how much state aid local jurisdictions receive for education. “We’ve done better than the average state,” he said. “But we should be doing better.”
But some critics suggest the fund is a band-aid solution for an ongoing structural problem.
The Thornton Plan requires the state to pay for education at a higher level than it can afford, and the fund is a vote-buying mechanism that offers residents a sense of security without addressing the ongoing deficit problem, said Christopher Summers, president of the conservative Maryland Public Policy Institute.
The Maryland State Education Association supports a different plan for how the trust fund money ultimately should be used, although Sean Johnson, managing director of government relations for the union was pleased with the state’s recent funding levels.
“In this economic day and age, [the state] holding the line on education funding is a huge win,” Johnson said. Nonetheless, the trust fund was “supplanting funding, rather than supplementing it.”
MSEA advocates a change to a separate funding source called the Geographic Cost of Education Index, discretionary aid that provides extra funding to counties where the cost of living is higher.
Gov. Martin O’Malley (D) fully funded the index — which stood at $128 million — for fiscal 2013, as had been done in previous years.
But going forward, an extra $223 million per year from expanding gambling could secure the index — even when adjusted for inflation, Johnson said.
The full funding of GCEI is an example of how the trust fund helps the state by freeing up general fund revenue, said Sen. Bill Ferguson (D-Dist. 46) of Baltimore, a former teacher.
But Ferguson also says the fund can be doing more, and advocated a plan during this year’s regular session to use the trust fund to pay for universal pre-kindergarten in the state.
The measure didn’t pass this year, but Ferguson said he plans to try again in the next session.