AUGUSTA, Maine (NEWS CENTER) — The leaders of the legislature were still talking Wednesday, but it appears the sides are still no closer to an agreement on a new, two-year state budget.

Democrats took the unusual step of making their latest compromise offer public. It includes a reduction in the controversial 3 percent tax on higher incomes, passed by voters in November to provide $320 million in added funding for schools.

Republicans have claimed the tax is hurting Maine's economy and needs to be repealed. Democrats have said the only way to repeal the tax is to provide a similar amount of new school funding from other sources.

The compromise offer from Democrats would:

  • Reduce the surtax from 3 percent to 1.75 percent
  • Raise the threshold for that tax to incomes over $300,000 (The referendum had the higher tax rate start with incomes above $200,000)
  • Raise sales tax by 0.25 percent
  • Increase lodging tax by 1 percent

Democrats said their new plan would generate $250 million in added funding for schools and still meet or exceed the long-debated 55 percent state funding goal.

Speaker of the House Sara Gideon said in a written statement that they offered the compromise, "In order to continue to do our work, to serve the people of Maine, and to close a budget, we must move this process forward."

However, the Maine People's Alliance, one of the primary Democratic activist groups and a member of the coalition that passed the Question 2 referendum, slammed the compromise for reducing the tax. The MPA called the plan "a betrayal of the people of Maine."

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Republican Senate President Mike Thibodeau also rejected the offer, indicating he was still sticking to his own proposal to increase school funding by $100 million, in exchange for getting rid of the 3 percent tax. He said that dollar amount would also meet the 55 percent goal.

"While we are all passionate about our positions, we cannot allow that passion to become on obstacle to finding common ground and passing a responsible budget," Thibodeau said in his own written statement.

The party leaders are expected to continue negotiating, with increasing time pressure. The new budget must be in place by June 30 to avoid a shutdown of state government. Party leaders have said that in order to meet all the timelines, the full legislature needs to pass a budget, with a two-third majority vote, by June 15 or 16.

Reaching that two-thirds majority will require significant support from lawmakers in both political parties.