EDITORIAL: O’Malley’s welfare state

In November, Maryland voters will decide on Gov. Martin O’Malley’s proposal to legalize slot machines in the state. The current debate on the issue is completely different from the one that took place under Republican Gov. Robert Ehrlich, who lost his bid for re-election in 2006. Mr. Ehrlich regarded slots as a means to save the state’s horse-racing industry, and he preferred raising revenue from legalized gambling to increasing taxes. But Mr. O’Malley, Senate President Mike Miller and House Speaker Michael Busch have different agendas in mind with the slots referendum, which include massively increasing the size of government, and possibly the creation of some form of a state-run health care system in Maryland.

In pushing for slots, the governor will have the support of Big Labor and Big Business, in the form of the Maryland State Teachers Association (the state affiliate of the National Education Association), the Maryland-District of Columbia chapter of the AFL-CIO and the Maryland Chamber of Commerce. During Mr. Ehrlich’s tenure as governor, Republicans put aside their own reservations about slots to support his position. But as the fiscal implications of Mr. O’Malley’s referendum become clear, look for Republicans to get as far away as possible from the governor’s position on slots.

Until recently, Maryland Democrats were deeply divided over the issue. During the Ehrlich administration, Mr. Miller, Calvert Democrat, a long-time advocate of slots, joined the governor in trying to get legislation through the Maryland General Assembly. But Mr. Busch, an Anne Arundel Democrat, was hostile to the idea and mobilized an anti-slots coalition, comprised mainly of liberal legislators from Montgomery County, Prince George’s County and Baltimore who favor increased taxes and pastors who view gambling as a sin. In 2003, 2004 and 2005, Mr. Ehrlich’s slots proposals died, due largely to opposition from Mr. Busch and the overwhelmingly liberal House of Delegates. The issue lay dormant until after Mr. O’Malley was elected governor. During last fall’s special session, which was supposed to alleviate Maryland’s fiscal problems, the General Assembly took one very big step to worsen them. The Democrats (with the help of some in the Republican minority) voted in favor of Mr. O’Malley’s plan (O’Malley-Care) to substantially expand Medicaid to cover an additional 100,000 Marylanders.

The nonpartisan Maryland Department of Legislative Services projected that O’Malley-Care would cost $185 million in fiscal 2009, soaring to $800 million by 2013 - and that was a very conservative estimate. (Moreover, as this editorial page was first to point out, beneficiaries of this generous new program included thousands of households headed by illegal aliens.) But Maryland law requires that the state budget be balanced. Legislators, realizing that they could not possibly increase taxes enough to pay for pay for the program, approved legislation to allow Marylanders to vote this year on whether to permit slot machines. Mr. Miller and Mr. O’Malley have been warning that if Marylanders fail to approve slots, draconian cuts in public education and other services are certain to follow.

But the reality is that the governor is in political trouble. His public approval rating is an abysmal 37 percent, and he has already increased taxes by $1.4 billion. Although Mr. O’Malley denounced previous slots proposals as “morally bankrupt,” this one may prove to be a political lifesaver for him: If the referendum passes, he can claim credit for lavishing new benefits on the people of Maryland, showing everyone how “compassionate” he is with other people’s money. If it fails, he can always blame talk radio, Mr. Ehrlich or some other imaginary villain. (Rumor has it that the governor would like a senior position in Washington if a Democrat wins the presidency, which would mean that dealing with the consequences of a failed slots referendum would fall to Mr. O’Malley’s successor.)

But if the voters approve slots, Maryland taxpayers may be the ones wanting to leave the state. Tom LoBianco of The Washington Times reported May 15 that analysts at Moody’s credit rating agency are concerned about Maryland officials banking on new revenue to pay for future programs. “Between fiscal 2009, budget balance is dependent on [slots] revenues, particularly in fiscal years 2012 and 2013, when they are estimated at $453 million and $604 million respectively, levels that may be overly optimistic,” Moody’s analysts wrote in February. However, the governor and his political allies don’t seem inclined to let fiscal realities get in the way. Mr. O’Malley’s preference is to have federally provided universal care. Just a week and a half ago, the Maryland Health Quality and Cost Council , led by Lt. Gov. Anthony Brown, began hearings on providing health care to 800,000 uninsured Marylanders - eight times as many people as the O’Malley-Care plan passed last year would cover. In short, slots are a down payment on a massive expansion of the welfare state in Maryland.