It could have been much, much worse.
That was the sentiment that ran through the State House Friday afternoon as Gov. Martin O'Malley briefed counties officials, union leaders, environmentalists, teachers and lawmakers on his $34.2 billion state budget proposal for 2012.
As promised, the plan would not raise taxes. Rather, it seeks to spread spending reductions across a wide range of groups and interests — but it doesn't include any of the headline-grabbing cuts that states such as Illinois and California have sustained to keep government operating.
O'Malley said Friday that he's starting to "see a little light on the horizon," but he continued to characterize the budget as one of the toughest.
"We are balancing more than a budget here," O'Malley said. "It is a real balance in needs and priorities of some of the core responsibilities of a civilized people and what they choose to do together through that tool of theirs that is the government."
O'Malley's plan addresses the roughly $1.35 billion shortfall between the administration's estimated expenses and revenue by cutting about $950 million and using grants and transfers to plug the rest of the hole. The plan tweaks some government operations, including merging some policing operations, but contains none of the widespread agency mergers that had been discussed in recent weeks.
Senate President Thomas V. Mike Miller said Friday afternoon that his reaction to the budget plan was "very positive."
"I think most of the members will be on board," Miller said. "It's a comprehensive solution to a huge problem."
The General Assembly can propose deeper cuts or tax increases.
Under O'Malley's proposal, the state's operating budget would grow from $13.1 billion to $14.6 billion, though top aides to the governor played down the size. Last year's general fund was supplemented by $1.4 billion in federal stimulus money that will not be available this year.
The biggest impact would be felt by hospitals, which could end up losing about $260 million in state Medicaid dollars.
"It's a larger number than we've ever seen," said Jim Reiter, a spokesman for the Maryland Hospital Association. He said it's unclear how hospitals will absorb the cuts, adding that there could be job losses.
State workers would get the biggest favor: no furloughs. But they'll also take a significant hit if O'Malley's pension overhaul proposal is enacted. The governor outlined a plan that requires state workers to pay an additional 2 percent from their salaries to maintain their current pension benefits. New hires will have to wait twice as long to be vested in the plan, an idea endorsed by a commission on pension sustainability.
O'Malley said his goal was to save the defined-benefit pension. The changes he proposes would reduce a $16 billion unfunded liability that has caught the attention of analysts at rating agencies.
O'Malley put a positive spin on the proposal, saying he rejected the idea of "using the recession" to "kill" traditional pensions for state workers by moving them to a 401(k) type plan, as many have suggested.
Unions aren't buying it; they say they will fight the plan in the legislature.
"The rug is essentially being pulled out from under us," said Patrick Moran, director of AFSCME Maryland, part of the American Federation of State, County and Municipal Employees union.
The counties also got good news: As promised, the governor did not propose shifting any of the costs of teacher pensions to the counties. However, he said he would keep an "open mind" if the legislature passes a measure proposing such a shift.
The counties also got some bad news: O'Malley's proposal would leave them to pick up most of the tab for collecting property taxes, and they won't get back the millions in road maintenance fees, something they fear will become a permanent part of the state's operating budget.
Howard County Executive Ken Ulman, a Democrat, said the plan would mean "continued tough times for counties."
Ulman, who is the president of the Maryland Association of Counties, said his colleagues are discussing whether they will push the legislature to enact a tax increase that could be used to restore the local road money.
He might have a difficult time forging a consensus. Harford County Executive David Craig, a Republican, said he's worried about a "chilling effect" on businesses if the General Assembly considers tax increases this year.
Education advocates were digging through budget details Friday evening, worried that the governor is proposing changes to the landmark Thornton rules that could result in big cuts to some counties and Baltimore city. They said they would fight to ensure that per-pupil dollar allocations remain the same.
"I thought education would be cut more," said House Speaker Michael E. Busch as he emerged Friday afternoon from a briefing at the governor's mansion. "We'll work our way through the cuts."
Students at the state's public colleges and universities would face a tuition increase, but the 3 percent hike is below the 5 percent that the state's university system expected.
"I wouldn't want to be in a higher-education system in another state," said former Sen. Patrick Hogan, the lobbyist for the University System of Maryland. "I think that is the best that can be expected."
There were even some happy advocates, a rarity after three straight years of tough budgets.
The budget provides 25 percent more money than last year in the Chesapeake Bay Trust Fund, a program that provides money for bay cleanup projects.
"I'm trying not to be too gleeful," said Kim Coble, the executive director of the Chesapeake Bay Foundation.
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