AUGUSTA – Gov. John Baldacci is proposing to lower all Mainers’ property taxes by putting the state government, municipalities, counties and schools on a spending diet.

On Tuesday he unveiled a plan that would prohibit all levels of government from increasing their budgets faster than the growth of personal income in Maine – about 2.5 percent a year.

Baldacci and legislative leaders from both parties also proposed to give municipalities $250 million more for education in the next two years, the largest increase for education “in the state’s history,” Baldacci said. Just as important: Municipalities would have to use 90 percent of that – $225 million – to lower property taxes.

Demanding that more state money be spent to lower property taxes would provide immediate relief, and capping budgets would provide long-term relief, Baldacci said.

Additionally, $16 million more would be spent to provide up to $1,000 in rebates to ensure that no Maine homeowners spend more than 6 percent of their household income on property taxes, he said.

Baldacci did not say where the additional $266 million will come from. He noted that the state anticipates $90 million more in income from an improved economy, and he said the plan includes no tax increases. But when asked, he did not provide details on how the proposal would be funded. The state currently faces a $733 million two-year shortfall, including the $266 million.

The governor called his tax relief plan “historic and unprecedented,” and said he’s keeping his pledge to voters who rejected the tax-cap referendum “that the first order of businesses this legislative session would be property tax relief.”

It’s critical the solution be bipartisan, he said. “When it comes to property tax relief, there are no Republicans, no Democrats, no independents, just people who are paying too high a property tax bill.”

Legislative leaders, rank-and-file lawmakers and officials crammed into the State House Cabinet Room to hear details of the plan.

Baldacci, and the House and Senate leaders who spoke after him, pledged to act cooperatively to pass the plan, unlike last year.

“The future is in our hands,” Baldacci said.

The governor’s actual legislative language began to circulate only in late afternoon yesterday, one day before the new Legislature is to convene. But he said property tax relief would be made available through a combination of income-tied refunds and what he called a tax deferral loan program, with repayment to come when a property changes hands.

As part of his plan, Baldacci is proposing a four-year series of hikes in money to schools to bring the state share of school funding to 55 percent, in addition to the budget caps. Baldacci also called for a constitutional amendment to allow municipalities, if they choose, to not tax some homes at 100 percent of valuation, shielding them from “hot markets.”

Democratic House leader John Richardson, D-Brunswick, hoping to be elected House speaker Wednesday, called for a bipartisan effort to enact legislation by the end of January. Republicans credited Baldacci with putting forth a good faith proposal.

As outlined by the Baldacci administration, the governor’s package envisions a refund program through which up to $1,000 would be available for people with income levels of $50,000 for single earners and $75,000 for joint incomes, for program year 2005.

Baldacci boasted that his plan puts “a fundamental, historic and unprecedented solution” within reach.

Lawmakers did not go quite so far, although Democratic Senate Whip Kenneth Gagnon, D-Waterville, called it “a much broader framework than I thought we were going to be seeing. Eight years of legislative service and I’ve never seen anything this bold in terms of property tax relief.”

Indicating that Republicans would be willing to work on an accelerated timetable, Senate Minority Leader Paul Davis, R-Sangerville, said he looked forward to working with Baldacci and Democratic lawmakers during the next few weeks.

Baldacci said his package was built in large measure on a foundation supplied by the Maine State Chamber of Commerce, which unveiled its own tax relief plan in September and has taken steps toward getting it before state voters in a referendum.

Chamber President Dana Connors, who attended Tuesday’s announcement, said he found obvious similarities at first blush and praised Baldacci for embracing the business community’s desire to lower the tax burden in Maine.

Connors specifically hailed as “tremendously significant” the idea of establishing an independent commission to monitor progress in lowering the tax burden, with a goal of reaching the national average in 10 years.

At the same time, “not as a threat,” Connors suggested that the Chamber would reserve judgment on whether to proceed with a referendum drive until it becomes clear over the next month and a half whether Tuesday’s professions of purpose turn into results.

“We’re going to know,” he said, in time to decide if there is a need to press for a referendum.

– Sun Journal staff writer Bonnie Washuk contributed to this report.