I spent several days in Helena working on Montana’s budget. In the 1980s, I watched the A-Team series. When the A-Team completed a successful mission, their leader’s statement was, “I love it when a plan comes together.”
Six years ago, because Montana did not have a “savings account” to mitigate recessionary impacts, I put forth a plan for one. Two sessions ago working with the Conservative Solutions Caucus, despite significant resistance from the Executive, I passed the Budget Stabilization Reserve Act.
At that point it was an empty savings account that my detractors said would never fill. This last session I made updates and a working rainy-day fund was added.
Today I am pleased to report Montana’s Savings Account is full, holding $117.8 million in reserves. The State also has $36.6 million in Fire Fund Reserves and for fiscal year 2019, a General Fund ending balance forecast of $358.1 million.
In the words of the A-Team, which is what the Conservative Solutions Caucus represents, I love it when a plan comes together. Why are reserves important at the state level?
State Government distributes 90% of its tax dollars to support local services in Montana communities. A total of 51.3% of the funds are invested in education statewide, 26.5% go to the Dept. of Public Health and Human Services statewide (hospitals, nursing homes, medical in local communities etc.) and 15.4% go to corrections/law enforcement statewide.
While I always focus on finding savings in state spending, I also recognize that most of these local services are critical to Montanans. The last U.S. recession was over 120 months ago, making this the longest time in history without a recession.
While I hope Montana continues to remain recession free, a recession in the future is inevitable. When Montana has solid reserves, a recession is unlikely to drive tax increases or disrupt critical local services.
Why is the state’s current tax revenue stream above earlier estimates? The state primarily operates on income tax, whereas the property tax funds the local share of cities, counties, and local K-12 schools. Income tax, mostly from W2 wages (payroll), came in nearly $100 million higher than estimated. This was mostly driven by growth in Montana’s urban economy, especially Bozeman.
Unfortunately, the rural ag economy that represents my area has not participated in this growth. Bluntly put, the ag driven rural economy sucks. Given that, local cities, counties, and school spending continues to increase property taxes, rural folks are hard pressed to make ends meet.
Let’s consider the Montana economy today.
From 2000-2015 Montana’s population grew 14% and jobs grew 20%. However, just five counties (Missoula, Gallatin, Lewis and Clark, Flathead, and Yellowstone) accounted for 75% of the growth. Bottom line, the traditional rural economy is losing population whereas the urban services economy is increasing.
Yet the Montana Tax System, which was designed for the traditional economy, has never been reviewed to determine if it is remains equitable. This urban-rural economic disparity is part of a tax equity study that I am participating in.
Hopefully a revenue neutral option can be found (no more tax money collected, just a fairer collection mix) that better reflects equity for the Montana economy of today and the Montana taxpayer.
Thank you for allowing me to be your Representative.