Montana budget picture continues to improve

HELENA — Montana's budget picture continues to improve beyond the original expectations of the state Legislature, as lawmakers were told Thursday there could be close to $500 million in surplus when they convene in 2013.

Budget staffers now predict there will be an extra $168 million in state coffers compared to what was first estimated for the two-year budget that began in July. The extra money means that lawmakers could go into session next year starting with a surplus exceeding $400 million — and perhaps much more.

The state is seeing increased revenues because individuals and corporations are earning more than originally anticipated and paying more taxes. The state also is seeing increased revenue from oil and gas production.

Revenue analyst Terry Johnson said there seems to be an uptick, again, in drilling rig activity in eastern Montana. That, and other factors, could continue to improve the state revenue situation.

Last session, Gov. Brian Schweitzer and Democrats argued that Republicans were artificially depressing revenue estimates in order to justify ideological cuts to education and government employees.

State unions sued over the resulting budget plan, arguing that Republicans bargained in bad faith during the negating process.

GOP legislative leaders, however, counter that economic uncertainty warranted a cautious approach.

State Sen. Bruce Tutvedt, R-Kalispell, said there still isn't as much money as it may seem because he believes much of it will have to be considered one-time cash that shouldn't be plugged into ongoing demands, like salaries or school funding.

The Republican leader said he thinks that one top priority both sides can agree on will be using some of the excess to find a permanent pension fix.

Currently, the projected shortfall for the state's government worker pension system exceeds $3 billion over the next 30 years. But the sooner the annual funding gap is closed, the less total money the state would have to put into the pensions systems due in part to the advantages of compounding interest.

Schweitzer — who leaves office at year's end — recently proposed a fix that calls for both employees and their public employers to contribute more, and also proposes funneling some natural resource development money into the pensions.

Republicans have not embraced that plan, as many hope to transition future employees away from a pension plan and into something like a 401(k) defined contribution program more common in the private sector.

Tutvedt said Republicans, who go into the November elections holding commanding majorities in both chambers, may also consider state employee pay raises this time around. He said spending some of the excess on education buildings remains a possibility as well, along with assisting eastern Montana communities struggling with rapid growth from the oil boom.

Lawmakers are also trying to tinker with the budgeting process to better ensure that both sides reach agreement during the legislature on how much money the state will receive during the upcoming two years. That revenue estimate, a constant sticking point during legislative sessions, determines how much can be spent.

Last session, and in years past, lawmakers have not been able to settle on staff recommendations.