Exhibit No. EX-99.h.3


                           Delaware Management Company
                               2005 Market Street
                             Philadelphia, PA 19103

June  14, 2006

Delaware Group State Tax-Free Income Trust
2005 Market Street
Philadelphia, PA 19103

     Re:    Expense Limitation

Ladies and Gentlemen:

     By our execution of this letter agreement (the  "Agreement"),  intending to
be legally  bound  hereby,  Delaware  Management  Company,  a series of Delaware
Management  Business Trust (the "Advisor"),  agrees that in order to improve the
performance of the Delaware Tax-Free Pennsylvania Fund (the "Fund"),  which is a
series of the Delaware State Tax-Free Income Trust,  the Advisor shall waive all
or  a  portion  of  its  investment  advisory  fees  and/or  reimburse  expenses
(excluding  any Rule 12b-1  plan  expenses,  taxes,  interest,  brokerage  fees,
certain insurance costs and extraordinary expenses) in an aggregate amount equal
to the amount by which the Fund's total operating expenses  (excluding any 12b-1
plan expenses,  taxes,  interest,  brokerage fees,  certain  insurance costs and
extraordinary  expenses)  exceeds 0.67% for the period July 1, 2006 through June
30, 2007.

     The Advisor  acknowledges  that it (1) shall not be entitled to collect on,
or make a claim for, waived fees at any time in the future, and (2) shall not be
entitled to collect  on, or make a claim for,  reimbursed  Fund  expenses at any
time in the future.

                                        Delaware Management Company, a series of
                                        Delaware Management Business Trust

                                        By: _________________________
                                            Name:
                                            Title:
                                            Date:

Your signature below acknowledges
acceptance of this Agreement:

Delaware Group State Tax-Free Income Trust

By: _________________________
    Name:
    Title:
    Date: