Gov. Ehrlich and Lt. Gov. Steele

Gov. Robert L. Ehrlich Jr. (right) and Lt. Gov. Michael S. Steele listen to questions from the state House Ways and Means Committee on slot machines, revenue and taxes. Ehrlich threatens deep cuts to everything but schools if slots are rejected. (Sun photo by Monica Lopossay / March 30, 2004)

Gov. Robert L. Ehrlich Jr. and top administration officials told a key House committee yesterday that they are willing to bend on virtually every aspect of their gambling plan except the one that might be most crucial to House Democratic leaders: increasing taxes.

Pressed by the committee - which killed the administration's slots plan last year - the governor and Budget Secretary James C. "Chip" DiPaula Jr. said they're open to a new "super-track" for horse racing in downtown Baltimore.

They said they'll negotiate state ownership of slots dens, an idea advocated by House Speaker Michael E. Busch that cuts out the owners of Maryland racetracks.

They even said they're open to pulling Prince George's County off the list of jurisdictions eligible for gambling facilities, which the county executive and some delegates representing the area have said they want.

But Ehrlich repeatedly said - to the committee and to a lunchtime pro-slots rally outside the State House - that he will not bend on significant tax increases, promising deep cuts in everything but public schools if the House rejects expanded gambling.

"Taxes are a non-starter," the governor told reporters. "The way to kill the slots bill again is to attach it to taxes."

The administration's unwillingness to bend on taxes could doom Ehrlich's slots plan, warned Del. Sheila E. Hixson, a Montgomery County Democrat and chairwoman of the House Ways and Means Committee.

"You know the position of the House," Hixson told administration officials at the end of the almost two-hour hearing. "We see slots and revenues as a cooperative situation. We hope we'll have a dialogue with you."

Yesterday's hearing was the governor's last chance this year to make a formal pitch to the Ways and Means Committee for his plan to permit up to 15,500 slot machines at three racetracks and three non-track locations. The committee could vote on the bill by the end of this week, Hixson said.

Legislative analysts project that the plan would raise more than $800 million for the state when the machines are up and running. The administration pledges to dedicate that money to increases in education spending promised in 2002 legislation known as the Thornton plan.

"If slots is defeated, we will fund Thornton," Ehrlich said. "It is the other programs that will suffer."

House Democratic leaders prefer a $670 million-a-year net increase in taxes that their chamber passed last week, as well as a further $65 million corporate tax increase approved Monday as a way to limit college tuition increases.

Hixson and other House leaders are urging the governor and Senate leaders to agree to at least a portion of their tax plan, noting that even if slots gambling is approved, it will be two years before most gambling revenues start flowing to the state.

The chairwoman has also pledged that if slots are to be approved by the House, it will virtually rewrite the Senate proposal. For example, a six-month study of gambling by Hixson's committee questioned why slot machine licenses should go to racetrack owners, rather than free-standing facilities owned by the state.

Hoping to curb any momentum to put slots at places other than the tracks - and to counter the huge turnout of slots opponents at last week's House hearing on gambling - more than 250 supporters of the horse racing industry gathered in front of the State House.

With chants of "Slots at tracks," "Save our jobs" and "No new taxes" led by lobbyists for the owners of Pimlico Race Course and Laurel Park, the workers cheered as Ehrlich emphasized the importance of saving and revitalizing Maryland's "historic racing industry." Almost a dozen horse transport trucks circled the legislative buildings, sporting banners with such slogans as "Grow Horses, Not Houses in Pastures."

"I just don't know why we've gotten to this point," said Kevin Witte, a jockey agent at Pimlico and Laurel who attended the rally. "It seems natural to piggyback slots onto horse racing to save the industry and the jobs."

Ehrlich and other slots supporters argue that a majority favor legalizing slot machines in Maryland, noting that two - and soon three - neighboring states have them at racetracks.

A poll released today by Gonzales Research & Marketing Strategies of Annapolis confirmed that 54 percent of Marylanders back legalizing slots, virtually unchanged from an October survey. The poll surveyed 825 registered voters, with a margin of error of plus or minus 3.5 percentage points.