Senators get ready to make gambling decision

O'Malley (D) wants to put 15,000 slot machines at five sites. Administration estimates that the state will collect about $700 million a year for education once the program is fully in place.

That would help slots parlors compete with those in other states, which receive close to 50 percent of gross gambling revenues. Likely bidders for slots terminals testified at a hearing last week that they would be at a competitive disadvantage with facilities in neighboring states.

‘‘We have to be able to get Maryland citizens back in Maryland and out of Dover, out of West Virginia and out of Pennsylvania,” said Miller (D-Dist. 27) of Chesapeake Beach. ‘‘... We’ve got to be able to put a good product in place to recapture that Maryland money that’s flowing out of the state.”

O'Malley (D) wants to put 15,000 slot machines at five sites that he says will generate about $700 million a year for the state when fully phased in.

The Senate Budget & Taxation Committee was voting Tuesday on several other key measures that are part of O’Malley’s deficit-elimination plan, including proposals to boost the sales and income taxes to help resolve the state’s projected $1.5 billion deficit.

The panel altered the way the state calculates increases in education assistance. Previously, the money rose based on how much surrounding states improved their school aid. Because those states pumped money into their school systems, Maryland's aid rose faster than expected.

The Senate committee decided to let education aid rise either with that benchmark, or with inflation, whichever is the less. In no case would school aid rise more than 5 percent.

The Senate also may ditch a proposal to tie increases in the gasoline tax to the cost of transportation construction.

But the most contentious issue, as it has been for years, remains slots. O’Malley has proposed putting the issue to a referendum on the November 2008 ballot, which would require the approval of three-fifths the members in both chambers — 29 senators and 85 delegates.

Miller has said it is up to the governor to secure the votes to pass his plan in the Senate. If it fails, Miller said, the General Assembly will adopt a non-referendum slots bill during the regular session, which begins in January.

Giving slots operators a larger piece of the pie did not seem to bother House Speaker Michael E. Busch (D-Dist. 30) of Annapolis, a longtime slots foe who has warmed to the referendum. ‘‘If the numbers work, I don’t think it’s a bad suggestion.”

Republicans charge that boosting the operators’ take doesn’t improve O’Malley’s proposal, which fails to yield any up-front revenue from the sale of gambling licenses.

‘‘To give these licenses away and to propose to give them more of the keep is not a good deal for the citizens of Maryland,” said House Minority Leader Anthony J. O’Donnell (R-Dist. 29C) of Lusby. ‘‘Although it sounds good up front, we have to be careful about undue enrichment of selected individuals as proposed in the governor’s bill.”

Legislators are also fine-tuning other components of O’Malley’s plan and considering additional spending reductions.

The Senate is likely to adjust proposed income tax brackets amid concerns from Montgomery County lawmakers that top earners will be forced to pay several thousand dollars more a year, Miller said.

‘‘The problem for us is we’re paying about 83 percent of the freight on this,” said Sen. Nancy J. King (D-Dist. 39) of Montgomery Village. ‘‘We’re talking about the stability of the county and the stability of the state here. We don’t want to lose those high-income earners.”

O’Malley has proposed a new 6.5 percent rate for the top bracket, while offering modest relief to middle-income households. Opponents argue such a high tax rate could cause affluent Marylanders — and businesses — to move out of state.

On Tuesday afternoon, Budget & Taxation was considering amendments to the governor's income tax plan that would set the top income tax bracket at 5.5 percent, a percentage point below O'Malley's plan.

Del. Tom Hucker (D-Dist. 20) of Silver Spring said O’Malley’s income tax proposal should be preserved because it is progressive.

‘‘Much of the rest of the package is regressive, unfortunately,” he said, pointing to proposed increases in the sales tax, titling tax and slots.