AUGUSTA – The Maine Legislature gave final approval on June 15 to a two-year state budget. The agreement is the result of weeks of talks among legislative leaders on both sides of the aisle. The $6.7 billion budget will fund state services for two years beginning July 1, 2015 to cover Fiscal Years 2016-17.

The agreement, which includes $171 million in income tax relief, creates three tax brackets in Fiscal Years 2016 and 2017.  The agreement also includes other forms of tax relief for Maine citizens. Specifically, 100 percent of all military pensions will be exempt from state taxes, making Maine a more attractive destination for retired members of the military.

The estate tax (also called the death tax) will be lowered to conform to the federal rate. Currently, the first $2 million of Mainers' inheritances are exempt from tax. Under the agreement, the first $5.5 million would be exempt. The agreement also adds more than $10 million in additional funding for the Section 21 wait list to provide services for those with mental, physical, and developmental disabilities.

Over the biennium, Maine nursing homes will receive an additional $16 million in state funding. The budget proposal continues to reform Maine's welfare programs by implementing a tiered system that eliminates the "cliff effect" and gradually drawing down benefits as Mainers transition from welfare to work.

In order to help balance the budget to conform with these changes, the state sales tax will remain at 5.5 percent. The meals and lodging tax will remain at 8 percent through 2015. Beginning January 1, 2016, the lodging tax will increase to 9 percent.

Senate President Michael Thibodeau said in a news release, "Given that we are operating in divided government, with a Republican-controlled Senate and Democrat-controlled House, I believe that this is the best outcome for the people of Maine."

The budget agreement garnered the necessary two-thirds majority votes in both the Senate and House of Representatives.