The Montgomery County Council yesterday gave final approval to a new $823 million county budget for the fiscal year beginning in July, giving most departments and agencies a 4 percent funding increase and county workers a 2.9 percent cost-of-living pay raise, but leaving the county $3.4 million short in paying for the new package.

Council members yesterday tried to squash speculation that they would have to increase the current tax rate to pay for the budget, a discussion they will take up next month.

Property taxes are already scheduled to increase an average of 8 percent because of rising property assessments.

Council members said they might be able to make up the $3.4 million shortfall without increasing taxes further if the county gets more money than expected from the transfer tax on homes. Also, the county is expected to generate another $4 million by selling its surplus property, although all of that profit may not go to fund the budget.

"Sources of revenue that looked pretty bleak four months ago look better today," said council president David L. Scull.

Montgomery's budget this year is not unlike the no-frills budgets of neighboring jurisdictions. Various governmental bodies have managed to squeeze out employe pay raises--often to fund agreements negotiated when inflation was much higher--while trying to avoid property tax rate increases, sometimes raising user fees to fill the gaps.

Only in cash-strapped Prince George's County will employes go without a cost-of-living raise this year.

Property tax revenues in Prince George's are capped by a voter-backed tax limitation amendment called TRIM, and County Executive Parris N. Glendening is looking at everything from a state-lottery bailout to a tax on utility firms to ease the budget crunch there.

Alexandria, and Arlington and Fairfax counties all plan to give employes a 3 percent cost-of-living increase, about the same as Montgomery, and only Alexandria plans to raise its property taxes this year.

D.C. Mayor Marion Barry has pledged to fund a negotiated 7 percent increase for District workers, and has also said any tax-rate rise would be minor. On the other hand, Barry is increasing a number of fees, from permits to press passes.

In Montgomery, the largest single spending increase over the current budget are for pay raises for county government workers and school teachers.

County workers will receive a 2.93 percent cost-of-living (COLA) increase; school personnel who bargained for their wages will get a 5 percent COLA raise, and Montgomery College employes, also under contract, will receive a 3.5 percent COLA raise.

Those cost-of-living increases will be added to already-scheduled incremental increases of about 3 percent.

While the new Montgomery budget is $3.4 million more than County Executive Charles W. Gilchrist said the county could afford, it is still $3.8 million less than what the various county agencies said they absolutely needed. Throughout the budget process, the council acted essentially like the biblical Solomon, splitting the difference between the agencies' requests and Gilchrist's recommendations.