Budget shortfalls take spotlight at special sessionGuest column
August 2, 2002
Budget shortfalls take spotlight at special session
For the third time in my legislative tenure and for the first time in this interim a special session will occur. This special session is for the purpose of addressing a serious budget shortfall. The special session is scheduled to begin on Monday, and possibly will last for two weeks to address a $63.5 million budget shortfall (give or take $12 million). House Appropriations, Senate Finance, House Tax and the Senate Tax committees have met in presession committee meetings to consider some of the nearly 100 bills that have been proposed for this special session.
In this presession update I will explain where we are budgetwise, how we got in this budget crisis, and try to predict what might happen in this upcoming session, Keep in mind that my crystal ball is mighty dry and dusty, making predictions somewhat unreliable.
The budget crisis that Montana finds itself in, in this special session, is simply a precursor of the budget crisis that Montana will find itself in when the 58th legislative assembly meets in January 2003. In all reality, from the budget analysis that has been done by both the governor's office and the Legislative Fiscal Analyst's Office, the special session will need to resolve at a minimum a $51.5 million budget shortfall before we can adjourn. Because the economy is in the tank and because no monies have been allocated for the upcoming forest fire season and because there is a strong potential that the Department of Health and Human Services will request a supplemental money appropriation later on this biennium, some legislators and budget analysts argue that an additional $12 million needs to be addressed before our short-term budget woes are truly resolved, bringing the total budget shortfall to $63.5 million. As for the general session that will be meeting in January 2003, the budget deficit for that biennium is projected to be around $250 million.
Over the past eight years, Montana had excellent incoming revenue. What occurred during that time period legislatively was a series of tax breaks that eliminated some $430 million in tax revenue. What also occurred during those eight years was an expansion of state government, an expansion that was greater percentagewise than the private sector growth in Montana. A significant amount of the $430 million in tax reduction monies was used to fund local government services (counties, cities and towns, school districts, etc.) So to make up local government's loss in revenue, it was necessary for them to increase property taxes.
What has transpired then at the state level is decreased income and increased expenses creating a budget deficit, while at the local level, property taxes have gone up to make up for the loss in state monies and loss of taxing authority. This combined with the stock market going in the tank, creating a reduction of $50 million plus in capital gains tax income, and you can see why we have a budget crisis currently in Montana.
Now for the crystal ball stuff. I anticipate the governor's budget remedies will be accepted for the most part. A few targeted programs will be spared the budget ax, and a few unsuspecting programs will feel the ax. I think the Legislature will trim to around the $51 million figure and hope the fire season is not as bad as some are predicting it might be. There probably will be an increase in the tobacco tax, but as far as any other tax increases, i.e. rental cars, gambling taxes, bed tax and outfitters tax, this won't happen mainly because the administration currently has its eye on those monies to give an income tax cut in the 2003 legislative session.
This special session will be painful for many people in the state from education to human services to local governments, but this special session will only be a small sampling of what to expect in the next biennium.