The 2012 budget that Gov. Martin O’Malley unveiled on Friday in Annapolis calls for a slight increase in state aid to Baltimore County.

County officials—like many of their counterparts across the state—had been bracing for much worse news after the Democratic governor had warned last month of "a diet of steady cuts."

But O’Malley’s proposed $34.2 billion operating budget includes nearly $691 million in direct state aid, including retirement payments, to Baltimore County—an increase of $9.3 million or about 1.4 percent.

"If you think this is bad, you should have seen it 30 days ago," O'Malley said of his budget proposal.

Not all of the news was good, though. County libraries and the Community College of Baltimore County are slated to receive cuts of $58,000 and $152,000, respectively. And several projects on County Executive Kevin Kamenetz's wish list were either omitted or under-funded, including money for the Hampton Elementary expansion. 

As promised, O'Malley's budget contains no tax increases and no mention of shifting teacher pensions to the state's 24 jurisdictions, a financial obligation that could cost Baltimore County up to $90 million.

O'Malley did propose shifting $35 million in costs associated with the operation of property assessment officers in each jurisdiction back to the counties.

County officials were not immediately available for comment Friday afternoon.

Two weeks ago, Kamenetz said he did not favor shifting the cost of state programs to local jurisdictions because it would merely force local government to pass along the costs to taxpayers.

"It makes no difference that they are writing a check to the county or the state," Kamenetz said at the time. "A dollar is a dollar to taxpayers."

The county, as with other jurisdictions will continue to struggle to find ways to pay for a mounting list of road projects.

Of the $134 million in state Highway User Trust Fund money, all but $10 million will go to Baltimore City. The balance will be allocated among the remaining 23 counties.

The county's share of the state Highway User Trust Fund, which is generated by a tax on gasoline, will remain essentially flat at about $1.2 million. Over the last two years the state has cut 95 percent of the trust fund payments to counties and used the money to help balance the budget.

The county would also lose more than $700,000 in state aid to local health departments, disparity grants and Program Open Space funding.

Proposed state aid to Baltimore County:

"(O'Malley) could have cut deeper into local government but he didn't," said House Speaker Michael Busch.

But local jurisdictions are not out of the woods yet. The legislature will have an opportunity to cut the budget before they have to pass a final version by April 4.

Still on the menu is the possibility of transferring some costs of state teacher pensions to local jurisdictions.

O'Malley wouldn't commit to rejecting taxes or shifting pension costs should the legislature add that to the final budget, which requires his signature.

Shifting teacher pensions to the local jurisdictions could cost the county up to $90 million, according to some estimates. That's equal to a nearly 18-cent increase in Baltimore County's property tax rate.

Del. John Olszewski Jr., chairman of the county's House delegation, said he hopes legislators from the county will unite over the next few weeks to "tell the county's story of fiscal responsibility."

"Just because we haven't had to layoff or furlough employees doesn't mean we should be the target of further cuts," said Olszewski, a Democrat who represents the 6th District, including Dundalk and Essex.

UMBC, school projects top capital budget for county

O'Malley also proposed nearly $88 million in capital budget projects for the county. Nearly half of the proposed amount, about $41.2 million, would go to the construction of a new performing arts building on the University of Maryland, Baltimore County campus.

The proposal also includes $19.3 million for improvements to nitrogen reduction efforts at the Patapsco Wastewater Treatment Plant.

The capital budget proposal includes $20.6 million for 14 school construction and renovation projects.

Proposed school construction and renovation projects. Amounts have been rounded:

The amount proposed for the Hampton Elementary expansion is more than $5 million less than the state's full $6.5 million share of the project. County Executive Kevin Kamenetz made getting the full state share part of his priorities for the session.

Another Kamenetz priority not included in the initial proposal is $2 million for infrastructure upgrades along the Liberty Road corridor near Northwest Hospital.

Yolanda Winkler, a lobbyist for the county, told county delegates Friday morning that she was hopeful the project could be added before the budget is finalized.

Medicaid cuts, transfers erase budget shortfall

O'Malley said his proposed budget closes a $1.4 billion budget shortfall without tax increases, furloughs or layoffs of state employees. Independent state budget analysts put the projected budget deficit at $1.6 billion.

Included in his efforts are $950 million in budget reductions—about half to state agencies.  Another $285 million in savings will come from so-called redirection of existing revenues—including $34 million in fund transfers and diversions and $250 million in projects that normally would have been paid for with cash. Instead, those projects will be funded through bonds such as Program Open Space.

About $250 million in savings will come from cuts in state Medicaid reimbursements to hospitals around the state.

Additional savings could come from the proposed merger of the Maryland Higher Education Commission into the state Department of Education and the consolidation of some functions of police agencies that protect the Departments of Licensing, Labor and Regulation, General Services and Health and Mental Hygiene as well as elements of the various policing agencies associated with the state Department of Transportation.

O'Malley said there will also be some consolidation between the Departments of the Environment and Natural Resources.

State employees will feel the budget pinch in a different way.

O'Malley's fifth budget is expected to attempt to shore up the state pension program by asking employees to contribute more toward their own pensions.

Currently, state employees contribute 5 percent of their salary to receive a maximum benefit of 54 percent salary at retirement.

Busch said the plan laid out for legislators will still allow employees to contribute 5 percent but for a reduced maximum payout. To receive the maximum payout, employees would have to increase their contributions to 7 percent.