HELENA -- The Senate effectively killed a bill Monday to raise gambling taxes to provide health care coverage for all children, but it may not be the end of the issue.

The chamber refused to move the bill out of committee and debate it on the floor. The bill needed to pass Monday to meet legislative deadlines.

Its sponsor, Sen. Christine Kaufmann, D-Helena, said she and others may work on an initiative campaign to place this or a similar proposal before Montana voters next year.

On another gambling issue, the Senate voted 36-14 to strip language, added by Sen. Roy Brown, R-Billings, to House Bill 113 it adopted Saturday that would have forbidden out-of-state people from owning gambling licenses in Montana.

As later approved by the Senate, HB113, by Rep. Bill McChesney, D-Miles City, allows out-of-state residents to own liquor licenses in Montana to meet the requirements of a U.S. Supreme Court decision. Current Montana law forbids out-of-staters from owning liquor licenses.

The Senate rejected, 34-16, Kaufmann's motion to blast her Senate Bill 560 from the chamber's Public Health Committee, which tabled it earlier in the day.

"You have constituents who want us to do something significant on health care, not just nibble around the edges," she said on the floor.

Kaufmann said she was prepared to offer an amendment to turn the proposal into a referendum that would go before voters in November 2008.

However, her motion failed without any discussion.

SB560 would have set a graduated tax on gambling machines, making the tax higher if the machines produce more gross revenue for bars or casinos.

The revenue raised would have been combined with Medicaid and the Children's Health Insurance Plan to make sure all Montana children had health insurance coverage.

The higher taxes would raise an estimated $22.8 million in 2007, with the total rising to a projected $29.2 million in 2011.

Kaufmann said later she thought her motion would draw more support.

"I still believe that the people of Montana support universal health care and the steps that take us there and increased taxes on gaming," she said in an interview.

Kaufmann said the Montana Human Rights Network, a non-profit group for which she works as co-director, is "very much considering an initiative that would tie the two (higher gambling taxes and health care) together."

She said the network is trying to identify other groups and individuals that might support such a ballot measure effort next year.

"The gambling industry obviously has lots of power, but they can't stand up to the people of Montana," Kaufmann said.

On HB113, Sen. Vicki Cocchiarella, D-Missoula led the effort to remove Brown's amendment that would have forbidden out-of-staters from having Montana gambling licenses.

She pointed out that in order to have a gambling license in Montana, a bar or casino owner must own a liquor license. The U.S. Supreme Court has held that state's can't prohibit out-of-staters from owning liquor licenses.

If Brown's amendment remains on the bill, Cocchiarella predicted state taxpayers would be footing the bill to defend a lawsuit it is guaranteed to lose.

Cocchiarella said the Montana Tavern Association, an industry lobbying group, doesn't believe Brown's amendment is a good idea.

Brown defended his amendment, saying, "What we were saying is we don't want out-of-state people with a gambling license."

He added, "Frankly, I really don't care about what the Tavern Association wants or doesn't want."