Maine Legislature passes budget with paid family leave, tax cut for retirees

AUGUSTA — Maine’s Legislature voted Thursday to pass the final piece of a two-year state budget that includes a new paid family and medical leave program, as well as an income tax cut for retirees.

The Senate voted 22-9 Thursday night to pass the $800 million supplemental budget, following an 80-58 vote in the House earlier in the day.

Gov. Janet Mills pledged to sign the budget in a Press Herald column last week, virtually ensuring that Maine will become the 13th state to implement mandatory paid leave for workers who need time off to care for family members or themselves.

Sen. Peggy Rotundo, D-Lewiston, said the budget represents a bipartisan compromise and includes critical funding for child care, housing and emergency medical services, among other things.

“It will improve the lives of Maine families, strengthen our communities and bolster our economy,” she said.

While the budget passed easily with no further debate in the Senate, House Republicans argued against the proposal and called for more significant tax cuts in light of record state revenues.

The opposition by nearly all House Republicans meant the vote fell short of a two-thirds majority needed for the budget to take effect immediately upon the governor’s signature.

Rep. Melanie Sachs, D-Freeport, urged fellow House members to support the budget, saying the proposal addresses short-term needs and includes long-term solutions to issues facing the state.

Sachs is a member of the Legislature’s budget-writing committee, which voted 11-1 last week to pass the spending package. The strong bipartisan support among committee members suggested it could win the votes of two-thirds of the members in the House and Senate. But the nearly party-line vote Thursday fell far short of a supermajority, meaning the budget will take effect after 90 days.

Democrats were united in support, while Rep. Sawin Millett, R-Waterford, was the only Republican House member to vote in favor. Millett was a lead negotiator on the budget committee and said the package, while short of what his party wanted, did include some important initiatives, including a tax cut for retirees.

Millett said the failure to get two-thirds support could be a “setback to some of the higher priorities of the majority party.”

“A lot of things can happen in those 90 days because there will be no funding until sometime in early to mid-October,” Millett said. He cited housing, child care and paid family leave as initiatives that would go unfunded during the period.

However, the delay in funding is not expected to affect the launch of the paid family and medical leave program.

During the floor debate, some members of the minority party said Democrats were unwilling to compromise on key parts of the bill. They argued the budget expands state government and should have included more tax cuts.

House Minority Leader Billy Bob Faulkingham, R-Winter Harbor, described his caucus as feeling “almost desperate” by the end of deliberations despite being pleased with many of the budget’s provisions.

“I don’t feel like we’re walking away, I feel like we got walked away from long ago,” Faulkingham said.

Opponents argued that the budget was too far-reaching, in terms of both expense and governmental authority, and could harm Maine’s economy and taxpayers.

“Higher taxes and bigger government will ensure Maine is uncompetitive with other states,” said Rep. Joshua Morris, R-Turner.

The spending bill is the final piece of a state budget for the two-year period that began July 1. The Legislature’s Democratic majority already had approved a $9.8 billion continuing services budget to prevent any disruption in state services if a budget deal had not been reached. The portion that passed Thursday includes additional revenues the state expects to collect this year and next.

The package includes $25 million in startup funding to launch the 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 would be decided by a citizen referendum if lawmakers didn’t enact a program.

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 provision put forward by Faulkingham would 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 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.

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 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.