Gov. Janet Mills has pledged to sign a bipartisan agreement on a two-year state budget that would pay for Democratic priorities such as paid family and medical leave, and a Republican proposal to cut income taxes for retirees.

Lawmakers reached the agreement early Wednesday and Mills’ decision to support the plan, announced in a column published Thursday in the Portland Press Herald, ensures that Maine will become the 13th state to implement mandatory paid leave to workers who need time off to care for family members or themselves.

“It is my hope that implementing a paid family and medical leave policy in Maine that accommodates potential hardships for employers will make it easier for people to balance work with life’s unexpected challenges, like caring for a sick child or an aging parent, a change that will support our workforce and strengthen our economy in the long term,” Mills wrote.

The Legislature’s budget writing committee finalized the spending package of more than $800 million in a series of votes that began just before midnight Tuesday and continued until nearly 4 a.m. Wednesday. Committee members voted 11-1 to pass the budget, with Rep. Jack Ducharme, R-Madison, in opposition.

It will be presented to the full Legislature for votes next week. The strong bipartisan vote in committee suggests the deal could win the support of two-thirds of the full House and Senate, a threshold that must be met for the budget to take effect immediately.

“Our committee is proud of the work that we’ve accomplished, but more so on the impact this budget will have on Maine families, small businesses and communities,” said Rep. Melanie Sachs, a Freeport Democrat who co-chairs the Appropriations and Financial Affairs Committee. “Ultimately, we were able to reach a bipartisan agreement and our investments now will result in long-term stability for Mainers’ health, housing and economic security.”

Republican leaders did not respond to questions about the deal Wednesday. The budget includes a Republican proposal to expand income tax relief for retirees, but it falls short of the party’s demands for $200 million to $400 million in broader income tax relief.

The conservative Maine Policy Institute blasted the budget deal in a written statement, saying “minor” tax relief for retirees shouldn’t be used to justify “extravagant spending.”

“This deal doesn’t go far enough in providing tax relief for Maine people,” the group’s chief executive officer, Matthew Gagnon, said. “Maine Republicans should hold the line on income tax reform for all Mainers or withhold their support from this grotesque amount of state spending.”

HOPES FOR BIPARTISAN SUPPORT

Sen. Rick Bennett, an Oxford Republican who serves on the budget-writing committee, framed the compromise as a win for his party, which controls a minority of the seats in each chamber. Bennett said Republicans secured about $50 million in structural tax relief for retirees and families with children.

“These are more modest than what we were hoping, but they are important changes for people in Maine,” Bennett said.

“I think people can oppose parts of this budget and still realize it’s better because of Republican involvement and insistence on a little restraint,” Bennett said. “I think there’s enough of an imprint and improvement there that I’m hoping a sufficient number of Republicans will support it.”

Bennett said negotiators viewed the $900 million in additional revenue as one-time funding based on predictions from the state’s nonpartisan forecasting commission, so there was little appetite for long-term initiatives or tax relief that would carry into future state budgets.

A detailed breakdown of the budget was not available Wednesday, but House and Senate Democrats highlighted several initiatives in a statement and in response to questions from the Press Herald.

The compromise includes $25 million in start-up funding to launch a statewide paid family and medical leave program, which would be funded in the long term by a new 0.7% to 1% payroll tax, split evenly between employers and workers. Another $60 million in child care investments was included and will be used to double an existing $200 wage stipend for child care workers and expand a subsidy program for families.

Though Mills had promised not to raise taxes, and expressed reservations about the paid leave proposal’s impacts on small businesses, her administration had greater concerns that such a complicated issue could be decided by a citizen referendum if lawmakers didn’t enact their own program.

The committee’s budget also includes a proposal by House Minority Leader Billy Bob Faulkingham, R-Winter Harbor, to increase the amount of pension income that’s exempt from state income taxes from $30,000 to $35,000. The tax exemption for retirees will eventually increase to $48,000.

Lawmakers included funding for the governor’s proposed Dirigo Business Tax Incentive Plan, which would replace the existing Pine Tree Development Zones. The new program would provide, among other things, a $2,000 tax credit to businesses for every worker trained through an authorized employee training program and support capital investments by businesses.

Democrats said the budget also includes $19.8 million for a one-time, 3% cost-of-living increase for state pensioners and establishes a new Maine Dependent Tax Credit, which would provide a credit of $300 per dependent beginning in fiscal 2025.

INVESTMENTS IN CHILD CARE

The budget also funds investments in child care proposed by Senate President Troy Jackson, D-Allagash. That bill would double an existing wage stipend from $200 to $400 to help address workforce shortages and make child care subsidies available to more families by increasing income eligibility from 85% of the state’s median household income to 125%.

Democrats said the budget also includes $31 million to support struggling emergency medical services and $16 million in additional General Assistance sought by communities like Portland that are struggling with a surge in homelessness and asylum seekers.

It also includes funding for Housing First programs, which seek to provide homeless people with stable housing before working on other challenges like substance use or mental health.

It’s the second budget package approved this year. In March, majority Democrats passed a partial budget without Republican support that will fund current state services into the new fiscal year. The agreement reached Wednesday morning would cover new initiatives beyond the baseline budget.

The committee’s budget will need two-thirds support in the House and Senate to take effect as soon as the Legislature adjourns. Without that support, the funding for primarily new spending initiatives would not be available for 90 days after adjournment, three months into the new fiscal year.

The agreement comes uncharacteristically late in the session. The budget compromise will not likely be taken up by the Legislature until next week, because nonpartisan staff members need time to review the budget to ensure it is balanced and draft formal legislation that includes changes made by lawmakers for floor votes.

That means funding will not be available when the new fiscal year starts on Saturday even with two-thirds support. Current state operations will not be affected by any delays because funding for current services was approved in March.

The budget vote comes after a contentious end to the session, with emotional debates on hot-button social issues such as abortion, gender-affirming care, gun control and parental rights.

Negotiations over the change package have been taking place largely in private, with sessions occurring in between other business during a hectic close to the legislative session.

Last weekend, the committee moved beyond consensus portions of the budget and began a series of party-line votes on individual line items. But lawmakers continued to negotiate throughout the week, with House members of the budget writing committee scurrying to the chambers to cast floor votes before hurrying back behind closed doors.

Mills originally proposed a $10.3 billion budget – a nearly 10% increase over the previous budget. She had hoped that lawmakers would be able to work on a bipartisan budget.

Lawmakers, however, clashed early in the session over an emergency heating assistance bill negotiated by leaders before even taking office. House Republicans passed it, but their counterparts in the Senate objected to the process, delaying the vote by about a month before passing the bill unchanged.

That, coupled with Republican demands for income tax cuts, seemed to nudge Democrats into passing an initial budget to fund existing state services and laws previously passed by the Legislature, including providing 55% of state education funding. Democrats said they were worried that Republicans would shutdown state government over their demand. Republicans, however, disputed that claim.

Mills then released a second $900 million budget package, including new initiatives to address the state’s housing shortage, homelessness, food insecurity and other issues. Republicans continued to call for $200 million to $400 million in income tax cuts and welfare reform, highlighting historic state revenues and surpluses.

Mills’ second budget package left only $12 million for lawmaker priorities. More than 200 bills approved by the Legislature are competing for that funding, though some have been included in the budget.

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