AUGUSTA – The Legislature’s passage Wednesday of a $6.3 billion budget for the two years starting July 1 ended the politics of the budget.
Up next: the impact.
The budget includes a temporary increase in the sales tax and the meals-and-lodging tax, so it will affect residents and nonresidents. It may also lead to higher property taxes in communities around the state.
In exchange, many Mainers will see reduced income taxes. About 70,000 will have no income tax liability at all.
The reduction stems from Republicans’ resistance to rolling back significant income tax cuts that were passed in 2011 — and paid for in the budget that passed Wednesday.
Democrats and Republicans offset the tax cuts with other initiatives. One increases the sales tax from 5 percent to 5.5 percent for two years. The increase is projected to produce $146 million in state revenue.
It also means it will cost more to buy goods. And some sales-tax exemptions will disappear.
Newspapers and other periodicals will lose a sales-tax exemption, worth $5.9 million over the biennium.
The budget calls for a commission to study the state’s sales-tax exemptions and find $40 million in savings.
Dining out or staying in a hotel or lodge in Maine will cost more. The budget includes an increase in the meals-and-lodging tax for the next two years, from 7 percent to 8 percent.
While the 2011 income tax cuts will remain, wealthy Mainers will encounter limits on deductions. The budget limits deductions, to generate $65 million in state revenue.
The budget reduces revenue sharing to Maine cities and towns by $75 million. Gov. Paul LePage proposed cutting $200 million but the Legislature restored $125 million of that. The reduction still will force property-tax increases or service reductions in many Maine communities.
Lawmakers tried to blunt the impact in several ways.
They restored $9.1 million that LePage proposed cutting from Maine’s homestead property-tax exemption program.
The budget also includes a $29 million property-tax fairness credit that replaces Maine’s current circuit-breaker program, another property-tax relief measure.
School districts can expect additional funding over the next two years. The result is that the state will fund 47 percent of the total cost of education, closer to the voter-approved mandate of 55 percent.
The budget also requires that the state’s share of revenue from the Oxford Casino go to schools. The governor proposed using the estimated $14.1 million in casino money for other purposes.
The governor has said the budget cut education funding by $18.4 million. But the reduction was in programs that LePage favored.
The budget redirects the $18.4 million from LePage-backed reforms to the Essential Program and Services formula, which funds schools.
The budget includes LePage’s plan to shift $29 million in teachers’ retirement costs from the state to school districts. The shift goes into effect July 1.
The budget also increases funding for about 3,100 severely disabled Mainers who are on a waiting list for additional Maine-Care services.
LePage proposed eliminating funding for the state’s Drugs for the Elderly program, but the budget restored the $14 million.
Other human services programs are funded, including the Medicare Savings Program, Head Start, and general assistance to municipalities for low-income Mainers.
State employees will be eligible for merit and longevity pay increases, after a five-year freeze, thanks to $7.6 million in the budget.
And the state employees’ health insurance program will receive a $7.7 million boost.
The budget also includes $2.4 million for legislative candidates who use the public campaign funding program.
This story was corrected to show that the $29 million in teachers’ retirement costs shift from the state to local school districts beginning July 1.
Steve Mistler can be contacted at 620-7016 or at: