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Balancing Montana’s Budget: Next Steps

Governor Bullock launches balancedbudget.mt.gov to gather input from Montanans, provide transparency

Friday, September 8, 2017/Categories: Governor's Office/Tags:

Agencies today submitted spending reduction proposals to the Governor’s Office of Budget and Program Planning as enacted by MCA 17-7-140, marking the first step of several to balance the state’s budget. 

“Some very tough decisions are going to be made over the coming weeks and months as I work to responsibly balance our budget,” said Governor Bullock. “I remain hopeful that the legislature will work with me during this process to identify more responsible solutions to deliver a balanced budget that does not substantially impact education, healthcare, child protective services and public safety.”

The state is facing an unusual budget situation. While Montana’s economy is strong, revenues are down. Unemployment is low, more Montanans are working today than ever before in our state’s history, wages are increasing, and we lead the nation in manufacturing growth. But the revenue that funds our government does not reflect this growth, and combined with our state’s most expensive fire season ever, requiring fire spending of over $60 million, the budget is projected to be in a deficit.

Individual agency proposals can be found at balancedbudget.mt.gov.  

Why is revenue insufficient if the economy is strong?

Three reasons.

  1. Market prices for oil, coal and agriculture products have been very low for a number of years, and these commodities are an important source of revenue to the state.

 

  1. As noted above, Montana is experiencing a severe drought and 2017 will be the most expensive fire season in our state’s history.

 

  1. For over a decade the wealthiest people and companies in Montana have been receiving tax breaks – for example, someone earning minimum wage pays the same tax rate as someone earning over $500,000 a year.

Governor Bullock attempted to address these issues of tax fairness during the 2017 legislative session but the majority party rejected every proposal he requested.

Why is the state budget not balanced?

Governor Bullock proposed a balanced budget at the beginning of this year that took into account declining revenues and included ways to increase the state’s revenue in order to fund essential services like education, healthcare, and public safety.

On party-line votes, the Governor’s budget was rejected. Instead, the budget passed by the majority party relied on an unrealistic revenue estimate, and mandated cuts to services Montana families, children, and seniors depend on in case they were wrong. The majority party used this inflated revenue estimate to justify killing measures that would have increased revenues. 

The much talked about Senate Bill 261 set forth the cuts that would be required if the legislature’s revenue projections were not met. These cuts are automatically going into effect right now. The Governor does not have discretion in implementing those cuts, as they are specifically set out in this bill.

 

Has government spending increased?

The budget passed by the 2017 legislature spent more than the Governor had proposed. 

As the economy continues to grow, Governor Bullock has directed state agencies to continue to provide essential services Montanans deserve while being as efficient as possible with taxpayer money. Fewer permanent state employees are working today than when the Governor took office.

Government spending has increased in areas such as public education, higher education, child protective services, healthcare, and other essential services. Moreover, some unanticipated crises, such as aquatic invasive species, have required additional expenditures. All these areas of additional spending were passed by the legislature.

 

If there were concerns, why did the Governor sign the budget?

The governor expressed his concerns and made the most responsible decision he could at the time. Given the majority party’s refusal to raise additional revenues, a stalemate – where no budget was passed and the legislature extended their session – would not have been fiscally responsible. 

 

What spending reductions are being considered?

State law provides that if the revenues are less than a required budget reserve, the governor must automatically implement spending cuts to the “general fund” portion of the state budget. While every state agency will be impacted, eighty-five percent of the state’s general fund budget is dedicated to the Department of Corrections, the Department of Health and Human Services, and our primary, secondary and higher education systems. There are some parts of the general fund spending that the Governor does not have discretion to cut.

Governor Bullock has asked state agencies to submit proposals to reduce their general fund budgets by up to 10%, in order to balance the budget and comply with state law.

 

What happens next?

This is the first step of several to direct agencies and engage the public in the process to balance the state’s budget.

  • On September 14, the Revenue and Transportation (RAT) Committee will meet to provide any recommendations concerning the revenue estimate.
  • On September 25, the Legislative Finance Committee (LFC) may make recommendations concerning the proposed reductions in spending.
  • On September 26, Governor Bullock will begin his agency-by-agency review of the proposals.

 

Is making these cuts the only option the governor has?

Yes.  Unless a special session of the legislature occurs, the governor will be making these cuts of up to 10% of the state agencies’ general fund spending.

If a special session of the legislature occurs, the legislature could either agree to increase revenues – including the tax fairness measures the governor proposed during the 2017 legislative session – or make cuts to other areas of the budget that are not exclusively paid for by the state general fund. 

 

How can Montanans be involved in this process?

The governor remains hopeful the legislature will be willing to work with him through this process to identify areas where they can find responsible solutions to keep the state’s budget balanced. 

Montanans are encouraged to contact their local legislators. Montanans can find their local legislators’ contact information on the legislative district map here.

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