House passes $37 billion budget Maryland's House of Delegates passed a $37 billion spending plan mostly along party lines Friday, with Republicans and Democrats sparring over whether the plan had set aside enough money to cushion the blow from looming federal cuts known as sequestration. The plan now goes to the Senate. Although lawmakers there have signaled that they intend to tack on some changes to the way the state funds its pension system, they largely agree with the spending plan. With less than a month remaining in the legislative session, that means the budget still largely resembles the $37.3 billion plan proposed by Gov. Martin O'Malley in January. It relies on projected economic growth of about 4 percent and higher revenue from an income tax hike approved last year on six-figure earners to fund a handful of new and long-standing priorities championed by O'Malley (D). Chief among those priorities is education. The plan continues record funding for public schools, with total state support accounting for $6 billion of Maryland's $15.8 billion general fund. Higher education would receive an additional $1.3 billion, keeping Maryland on a four-year path of limiting annual tuition increases to 3 percent at state colleges and universities. The governor's plan also assumes nearly $350 million in new federal spending in Maryland under President Obama's Affordable Care Act to begin implementing an expansion of Medicaid coverage. In all, total Medicaid spending in the state would exceed $7 billion in the budget year beginning in July - a leading factor in an overall spending increase of 3.5 percent. Among the new items in the budget: Maryland would give its more than 70,000 state employees 3 percent raises and fund merit bonuses for the first time since 2009. The state would also begin to restore money for an array of grant programs that were curtailed during the downturn. Police would receive money for training, and municipalities would see a bump in road funds. The House, however, cut an O'Malley proposal to divvy out millions in "innovation" grants to state agencies and local governments to rethink how to deliver services to residents. On sequestration, the House agreed with O'Malley's proposal to increase the state's rainy day reserve by more than 15 percent, to $920 million. The House also increased the state's ending year balance to about $200 million. All told, Maryland would in theory have more than $1.1 billion at its disposal, though even in the depths of the recession, that state never touched its rainy day reserve to help preserve its top bond rating on Wall Street. Federal cuts to Maryland programs could approach $200 million, according to state estimates. But the state could also lose income tax revenue from thousands of jobs that may be lost in the area and from more than 46,000 defense industry employees in the state who face furloughs that could cut 20 percent of their pay. Republicans said the governor's budget didn't adequately account for ripple effects in the economy from sequestration. Democrats praised the plan - and projections that spending and revenue would remain mostly in balance for the next five years, saying it showed that O'Malley and the legislature had prudently charted a course through the recession.