By Greg Jergeson
Well, here they go again. Last Friday, the Republicans in the House of Representatives proposed busting the permanent coal tax trust fund to properly fund the state share of K-12 education in the state of Montana. This was a fine bit of political gimmickry that offers no solution to the fiscal straits the Legislature finds itself in.
I do not believe the answer to our funding problems is to bust the permanent coal tax trust fund. The fact of the matter is that that fund is already being used to great effect. The income from the trust, which is substantial, is already used for local infrastructure, a variety of water projects, economic research and development, and needs funded from the general fund including education. To spend the principal of the trust fund would reduce the income it generates for those purposes.
And history is instructive in this regard. We used to have an "education trust fund" that was built with receipts from the coal tax. That particular trust had built until it was generating about $7.5 million per biennium for education. However, in 1987, as Montana's fiscal situation deteriorated, it was decided to use half of the principal in that particular trust in order to balance the state budget and properly fund education. It was proposed to do this just once.
The first thing that happened was that the ongoing revenue stream from the income generated by the trust was cut in half. The second thing that happened was that two years later, things had not improved so the remainder of the trust was used to pay current educational expenses. And then the trust was gone. And so was the annual interest income.
Finally, in 1991, with this source of income eliminated and the state
remaining in dire fiscal straits, the Legislature was forced to impose the
infamous "7 percent solution" which tacked a 7 percent surcharge on all taxes imposed by the State. I believe the "7 percent solution" is more responsible than anything else for fueling the current anti-tax sentiment so prominent among the public.
Now when the Governor and Republican legislators propose to "only bust the permanent coat tax trust this once," so they have two years to figure this all out, I am beyond skeptical. There is no answer here and they are wasting all of our time pursuing this avenue.
The permanent coal tax trust fund has occasionally been described as a "rainy day fund." It has never been that. If it had been spent every time Montana has been described as needing to use the rainy day fund, it would now be gone and would not be generating the annual $42 million that it currently generates for balancing our state budget.
There are other answers and they are reasonable. I will continue pursuing those so that we can properly fund public education in Montana.