State budget has no tax increases, limited spending, leaders say

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Gov. Martin O'Malley unveiled Wednesday a budget that is "on the verge" of closing a budget gap that once stood at $2 billion. 

The governor emphasized the more than 40,000 jobs he expected his $37 billion operating and $3.7 billion capital budget to support or generate during a briefing with reporters.

"These have been challenging years to say the least," O'Malley said. 

The spending plan includes raises for state workers, a record amount of $6 billion for education, a suite of $63 million in tax credits, some of which focus on the cybersecurity, biotechology and film industries. While there are no new taxes for state residents - though other measures could be considered separately.

Compared to previous years when the governor trimmed anticipated spending by as much as $1.4 billion and pushed controversial proposals and tax increases to help close the budget gap, key decision-makers said O'Malley's budget doesn't contain ideas destined to cause friction.

"There's an opportunity for everyone to take a deep breath after we made a lot of tough decisions," House Speaker Michael E. Busch said in an interview.

The governor also set aside extra cash in the state's rainy day fund in case the "harakiri Congress" fails to find a financial compromise and allows deep federal spending cuts that could harm Maryland's bottom line to the tune of $425 million. 

Senate President Thomas V. Mike Miller called the entire plan "a very well thought-out, a very balanced budget ... It keeps spending down, that's the big news." 

Among the highlights noted by O'Malley, legislative leaders and staff:

--An overall general fund increase of 4 percent. O'Malley said the total spending growth in his administration is lower than the previous six administrations.

--No tax increases to balance the budget, though others could be proposed later for the Transportation Trust Fund.

--The previously negotiated raise for state employees has been fully funded at 3 percent after years of pay freezes and furloughs.

--State university tuition increases will capped at 3 percent, in line with the hikes in recent years. The budget also provides additional money for community colleges. O'Malley said that the increases in Maryland tuition for higher education is the lowest of any state in the country.

--The state's rainy day fund will be increased to 6 percent of the budget, a full percentage point more than recommended by bond rating agencies, in large part to hedge against fallout from the current budget dispute between congressional Republicans and the Obama administration. In all, the state will put more than $1.1 billion in reserve against emergencies.

--Funding for education will exceed $6 billion for the first time.

--A new tax credit will be created for the cybersecurity industry.

--An increase in the tax credit for the film industry from $7.5 million to $25 million -- a measure that is expected to be especially beneficial to Baltimore.

--A $2 million expansion of the biotechnology and historic preservation tax credits.

--A cut in projected spending of $325 million.

--An outlay of $25 million for school safety measures.

--Some reductions in Medicaid and a cap in increases to providers.

--The lowest number of state employees since 1973.

--An increase in funding for textbooks for non-public schools and lunches in public schools.

Del. Norman Conway, chairman of the House Appropriations Committee, praised the governor's budget.

"I think he's made a proposal that certainly reflects minimum growth in spending," he said.

Conway, a Wicomico County Democrat, said the budget cuts about half of the remaining $421 million long-term shortfall known as the structural deficit. He said he is confident the legislature's budget committees can find enough cuts to close the rest of the gap.

"We're just about wiping it out," he said.

Republican leaders are expected to be briefed today and can be expected to have a different take on the governor's plan.