EHRLICH SET TO SIGN BILL TO EXPAND PRISONER DRUG TREATMENT

Key Part Of Justice Package Is 1 Of About 190 Measures Due Governor'S Ok Today

Gov. Robert L. Ehrlich Jr. plans to sign legislation today aimed at
reducing the state's prison population by expanding drug treatment options,
but is still pondering whether to veto a major tax policy shift he first
proposed.

At a morning ceremony, Ehrlich is expected to sign into law a key plank in
his criminal justice package. The measure, approved by the General Assembly
last month, is designed to divert nonviolent criminals into drug treatment
programs. The governor's Web site listed the bill as one of about 190 that
would be approved today.

State public safety and corrections chief Mary Ann Saar called the
initiative, to be launched with a $3 million down payment for more
treatment slots, a "better way of doing business."

"It will help those coming out of prison," Saar said. "It will help those
who don't really need to go to prison. And it will help those under
supervision -- 70,000 of them in the state -- by hooking them up with
treatment."

The drug treatment bill is one of several proposed by Ehrlich and adopted
by the General Assembly that will slide into the state's books with little
hesitation. But one of the governor's proposals -- a policy change that
would block corporations from avoiding Maryland taxes by shifting assets to
shell holding companies in Delaware and other states -- is causing more
consternation.

Loophole legislation

The governor said he has not decided whether to sign legislation closing
the so-called Delaware holding company loophole, claiming that lawmaker
alterations to the proposal increase the impact on businesses.

"It's more restrictive than when it came in," Ehrlich said. "I'm still
undecided. The problem here is it is over-broad."

That hesitation, which is puzzling and infuriating leading Democrats, puts
the governor in the unusual position of vetoing a measure that he proposed,
and delivering a major hit to the state budget in the process.

The $23.6 billion state budget for the fiscal year that begins July 1 is
balanced in part through $80 million in back taxes owed by corporations
that have used the loophole, and the bill could yield at least $37 million
yearly for state operations. The state comptroller's office recently won
court cases allowing the taxes to be collected.

Top Democrats rejected Ehrlich's claims that the bill was altered
significantly. "It is a false alarm," said Del. Sheila E. Hixson, a
Montgomery County Democrat who is chairwoman of the House Ways and Means
Committee. "It is not true."

Changes 'not major'

Stephen M. Cordi, the deputy comptroller who worked closely on the
legislation, calls changes made by lawmakers "not major."

"It still reads very much like the bill the governor introduced in the
first place," Cordi said. "The changes are largely technical, and they were
all business-friendly, with only one exception." The exception involves the
treatment of foreign taxes paid by corporations.

Legislative leaders were so furious at the governor's withdrawal of support
late in the session that they tied the bill to Maryland economic
development money: If the governor rejects the measure, $14 million will be
cut from the state Department of Business and Economic Development budget.

Liberal advocacy groups that have been promoting the loophole-closing
measure are accusing Ehrlich of withdrawing support for the measure to
placate large corporate interests that are heavy political donors.

"From an outsider perspective, it raises a very troubling appearance of
undue influence," said Sean Dobson of Progressive Maryland, which organized
a media event yesterday to demonstrate that small-business owners support
the loophole closing for fairness reasons. "It raises the question of what
kind of grip these mega-corporations have on Governor Ehrlich that are
causing him to veto his own bill."

Schaefer for bill

Comptroller William Donald Schaefer has urged the governor to sign the
bill, offering him in a letter "congratulations on the success of this part
of your legislative agenda."

But the Maryland Chamber of Commerce is lobbying against the measure,
saying it is overly complicated and contains a hidden tax on state businesses.

"The combined impact is not one of closing a tax loophole, but rather the
imposition of significant damage to Maryland's business climate," wrote
chamber President Kathleen T. Snyder in a message to the governor.

The comptroller's office can still collect the money even if the bill is
vetoed, Snyder said.

In addition to the loophole bill, Ehrlich also is considering vetoing a
living-wage requirement and a corporate income tax increase that would be
used for higher education. The vetoes will likely come just before the
final bill-signing ceremony May 26; today is the third of four.

Today's event will focus on the drug treatment bill, which was backed by a
bipartisan coalition of lawmakers and interest groups. Under the plan,
judges will have the opportunity to withhold adjudication of cases pending
treatment, and counties and Baltimore City must examine their treatment
slots to determine where needs lie.

About 25 states have passed laws to reduce inmate populations during the
past three years, said Vincent Schiraldi, executive director of the Justice
Policy Institute, which backed the bill.

"It's the first time in a long time that Maryland has done something to
actively reduce the people it is locking up," Schiraldi said. "It's a
combination of fiscal [needs], and shift in public opinion, and a
re-examination of incarceration policies."