- Associated Press - Wednesday, June 17, 2015

AUGUSTA, Maine (AP) - Maine lawmakers sent a two- year, $6.7 billion budget to Gov. Paul LePage early Wednesday that would slash income taxes, boost property tax relief, pump more money into schools and ensure that state government keeps running at the end of the month.

The House, where Democrats hold the majority, voted 105-42 in favor of the agreement. The Republican-controlled Senate followed with a 31-4 vote. LePage has 10 days to decide whether to sign it, veto it or let it go into law without his signature.

Legislators on both sides of the aisle applauded their ability to reach an agreement, which at times over the last week seemed far from certain.

“During the last week there were a lot of doubts around here … that in divided government we would be able to get to yes,” said Republican Sen. Roger Katz, a member of the budget-writing Appropriations Committee. “I think it’s a budget that both parties can take pride in,” he said.

House Democratic Leader Jeff McCabe called it a “true compromise” and an example of how divided government can work.

“There was a lot of give, there was a lot of take,” McCabe said Tuesday before the budget was given final approval just after midnight. “There are some benefits for both sides here.”

The final spending plan was the result of weeks of intense negotiations between the top Democrats and House Republican Leader Ken Fredette, who insisted that it include the GOP’s priorities of income tax cuts and welfare reform. At the same time, Democrats were reluctant to lower taxes for the highest earners.

When all the tax changes are factored in, Maine residents would see a net tax cut of $135.4 million in 2017, according to documents provided by legislative leaders. But while roughly 580,000 families would get a tax cut, almost 120,000 others would see their taxes go up under the proposal.

Under the plan, the top individual income tax rate would be lowered from 7.95 percent to 7.15 percent, but most of the tax relief would go to the bottom 90 percent of earners. There would also be three income tax brackets instead of the current two. In 2017, those who make up to $21,050 would be taxed at 5.8 percent and those who make between $21,401 and $50,000 would be taxed at 6.75 percent. Anyone earning more than that would be taxed at the highest rate.

The income tax cuts would be paid for in part by keeping the sales tax at 5.5 percent, instead of letting it go down to 5 percent like it was supposed to on July 1. In addition, the 8 percent meals tax would remain the same and the lodging tax would increase to 9 percent in 2016. The proposal also eliminates the tax on military pensions and doubles the $10,000 homestead property tax exemption in 2017.

Schools would get an additional $80 million over the biennium and state aid to cities and towns would remain roughly $62.5 million a year. But there would be big changes in how the state funds general assistance - the all-purpose, last resort welfare program administered by municipalities.

The Senate stripped the budget of an amendment added in the House that sought to ensure that the roughly 1,000 people who are seeking asylum in Maine can continue to receive municipal welfare benefits. That was opposed by some Democrats, who said they can’t support a budget that doesn’t provide assistance for immigrants who came here hoping to find peace and freedom.

“Voting to hurt men, women and children here in Maine, seeking a new life free of persecution is unacceptable to me,” said Democratic Rep. Jared Golden.

Meanwhile, Republicans criticized the plan for not including more money to help eliminate the waiting list for services for disabled people, which has been a priority for LePage. Rep. Heather Sirocki, a Republican who served on the Appropriations Committee, urged lawmakers to fight for a better deal.

“We can do the right thing, right now for the people who are not being served and for struggling Mainers,” she said. “We can choose to finish the job or we can choose to do what we have done so many times in the past: We go home and quickly forget who we have left behind,” she said.

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Follow Alanna Durkin at https://www.twitter.com/aedurkin

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