Gov. Janet Mills on Tuesday signed the final piece of the two-year state budget that includes a new statewide paid family and medical leave program, and replaces a popular program allowing Mainers 65 and older to freeze their property taxes.

Democrats passed the bulk of the state budget – about $9.8 billion – back in March to continue funding state services and programs already approved by the Legislature. The second part of the budget, signed Tuesday, includes new initiatives.

Both budgets were passed over strong Republic objections.

In addition to paid family and medical leave, the budget signed Tuesday includes a revamped business tax credit program, investments in affordable health care and housing, and income tax cuts for retirees.

But the funding and implementation of those programs will have to wait until this fall because the budget was passed by a simple majority and not the two-thirds support needed to pass as emergency legislation and become effective immediately.

Mills hailed the $10.3 billion budget.

“This historic budget delivers on my guiding belief that the way to build a stronger, more prosperous state is to invest in the infrastructure that Maine people need to succeed,” she said in a written statement. “From establishing a paid family and medical leave program to strengthening education, housing, child care, our workforce, and delivering tax relief for seniors, this budget makes transformative investments in Maine people. And it does so while living within our means – this budget is balanced while our Rainy Day Fund remains at a record-high.”

Passing the budget was one of the last things the Legislature had to do this session, which has dragged on past the planned June 21 adjournment date and concluded on a particularly contentious note with emotional debates on Democratic bills, including the expansion of abortion.

Lawmakers still must decide how split an additional $10 million to $12 million in leftover funding for bills already approved by both legislative chambers.

As of Tuesday, 266 bills have been passed at a potential cost of nearly $1.5 billion for next year alone. That’s far more funding than is available, so many of those bills could either die on the table because they receive no funding this session or be carried over to the next session.

The Legislature’s budget writing committee was scheduled to begin those discussions Tuesday afternoon.

It’s unclear how the process will play out. In recent years, funding for the special appropriations table has been evenly divided among each party’s caucus in each chamber. A spokesperson for Senate Democrats did not respond to questions about whether that would be the case this year.

The budget signed by Mills was recommended by an 11-1 vote in the Appropriations and Financial Affairs Committee, which crafts the budget. But it only garnered three Republican votes in the Legislature as the minority party protested the lack of funding for their priorities, such as income tax relief and welfare reform.

The package will replace the popular program allowing Mainers 65 and older to freeze their property tax bills – which was projected to grow exponentially in costs for the state and possibly municipalities. The program will be replaced by enhancing two existing tax relief programs that target lower-income seniors.

It includes a bill 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.

But that wasn’t enough to win Republican support for a bill packed with Democratic priorities, including $25 million in startup funding to launch a statewide paid family and medical leave program.

That program will be funded in the long term by a new 0.7% to 1% payroll tax, split evenly between employers and workers.

Rep. Joshua Morris, R-Turner, the lead Republican on the insurance committee, blasted the budget in a written statement.

“This budget scheme raises taxes on hardworking Mainers and increases spending above the already-record levels Mainers have been subjected to since Mills assumed office,” Morris said. “It pulls the rug out from under our seniors and is a terrible blueprint for the future of Maine.”

The inclusion of paid family and medical leave was lauded by the Biden administration, which released a statement praising Democratic leadership for moving forward on an initiative that has been stalled at the federal level.

“Paid family and medical leave improves the lives of working families and strengthens our workforce and economy,” White House Press Secretary Karine Jean-Pierre said. “We applaud states like Maine that are making progress on this critical issue.”

Though Mills had promised not to raise taxes, and expressed reservations about paid leave’s impacts on small businesses, her administration was more concerned that such a complicated issue could end up being decided by a citizen referendum if lawmakers did not enact a program.

Another $60 million in child care investments was included in the budget to double an existing $200 monthly wage stipend for child care workers and expand a subsidy program for families.

The budget includes funding for the governor’s Dirigo Business Tax Incentive Plan, which would replace the existing Pine Tree Development Zones.

It 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. Lawmakers included $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.

Money is set aside for Housing First programs, which seek to get homeless people into stable housing before working on other challenges like substance use or mental health.

The budget also continues to pay for two years of free community college and maintains state revenue sharing and public education funding, including universal free school meals.