University funding will depend on slots

ANNAPOLIS - The fate of the first ever source of dedicated funding for the state's colleges and universities, and with it the future of tuition, now lies in the hands of Maryland voters.

In a rushed and contentious special session of the state legislature that concluded yesterday morning, lawmakers approved Gov. Martin O'Malley's proposal to raise $56 million for higher education with a corporate tax increase.

The money, intended to hold down tuition costs, will begin to flow to institutions throughout the state next fall. Higher education institutions will receive $16 million in fiscal year 2008 and $55.5 million in fiscal year 2009 in a Higher Education Investment Fund. But O'Malley says the dedicated funding could be cut in 2009 if voters do not approve legalizing slot machines in a November 2008 referendum.

"The governor and the legislators were faced with a tremendous challenge," university President Dan Mote said. "From the point of view of the university, it showed great support of higher education."

Still, if voters decline to legalize the placement of slot machines in five counties within the state, money for universities would be left in doubt.

Slot-machine gambling is projected to raise as much as $550 million after a year of operation. But O'Malley has said if voters do not support them, the state will have to nix the dedicated funding for higher education and cut money for the University System of Maryland overall.

Yesterday, members of the Republican minority in the assembly criticized O'Malley for seeking to put pressure on lawmakers as well as voters by tying higher education funding to slots.

Del. Susan Krebs (R-Carroll) said she supports legalizing slot machines but complained that O'Malley and the Democrats used education as a way to get the bill passed in a form that she and others are not satisfied with.

Krebs said businesses should have had to bid on slot machine licenses rather than allowing the legislature choose the locations and recipients.

"We're calling it education because it sounds good," said Krebs. "It is not market driven at all. It's a huge financial boondoggle."

O'Malley's slots bill earmarks 50 percent of the income generated by slots for an education fund that will go toward K through 12 schools as well as university and community college construction projects.

However, that money is not divvied up on any set formula, leaving the General Assembly to decide year-by-year how much will be devoted to the system.

The raft of proposals approved yesterday also includes $1.4 billion in new taxes and $500 million in cuts all aimed at closing a projected $1.5 billion shortfall in next year's budget.

The Associated Press contributed to this report. cohendbk@gmail.com