Bootstraps & billions: What the state budget debate looks like outside the Capitol
A family, a budget and $2.5 billion
On a recent January day as Montana lawmakers gathered in Capitol hearing rooms to debate options for spending the state's $2.5 billion budget surplus, Shea Kumaewa was preparing to put her one-year-old daughter down for a nap.
Kumaewa, her husband and their daughter Asa live in an apartment on Missoula’s northside. Kumaewa spent a decade as an in-home caregiver for adults with disabilities before starting her own cleaning business when the family needed more income and flexibility in her schedule to take care of Asa. Her husband works full-time in construction.
Originally from Great Falls, they’ve lived in Missoula for more than a decade.
“I’ve got my bootstraps, I’m pulling them up, and life is still pretty hard,” Kumaewa said.
The family faces challenges of a changing Montana economy on multiple fronts — access to child care, affordability of housing and pursuing a job they love that doesn’t earn enough to support a family.
“I wasn’t able to make the numbers work even though that was a field that really meant a lot to me, that I really felt I was really making a difference in. And so yeah, it was really hard to walk away and to tell my clients that, not only would I not be helping them out, I wasn’t sure who would be helping them out,” Kumaewa said.
As the state Legislature and governor negotiate who is to benefit from the budget, tax breaks, one-time credits and investment in services, Kumaewa wonders how families like hers fit in the picture.
According to a state-by-state review of cost of living in the United States for the third quarter of 2022 conducted by the Missouri Economic Research and Information Center, Montana ranked 18th in the country. That means the cost of living in Montana was higher than about two-thirds of other states.
“We’ve seen a big shift in demand for Montana,” said University of Montana economist Bryce Ward in an interview with Montana Public Radio. “And now we’re seeing, having to deal with the ripple effects.”
As the economy reacts to changes from the pandemic, inflation and population growth, Ward said it’s important to keep an eye out for who is benefiting and who is getting left behind. He says data showing those trends won’t be available before this session ends.
Winners and Losers
Governor Greg Gianforte says his budget is “for Montana families” and highlighted his proposals at his State of the State Address last month.
“We embrace the fundamental idea that the American dream is a sacred one,” Gianforte said.
Gianforte’s plan calls for a $1,200 annual child tax credit for kids under age six; a $5,000 tax credit for families that adopt children; a one-time only $2,000 property tax credit; a 1% cut to income taxes; a 7% increase of the earned income tax credit for low-income Montanans; and $700,000 expansion of the business equipment tax credit.
In an interview with Montana Public Radio, Gianforte described how he imagines these policies benefiting Montanans.
“A young family in Highwood would get an extra $1,200 to pay for preschool or child care or diapers or whatever they want for each of their little kiddos,” Gianforte said. “A farmer in Scobey wouldn’t have to pay annual business equipment on his tractor anymore. And every Montana resident who owns a home would get up to $2,000 in property tax relief over the next two years.”
But the governor will need support from the Legislature’s supermajority Republican caucus to pass his proposals, and they’ve already had a few disagreements.
This week, Republicans advanced a roughly $1 billion tax break and spending package in the House of Representatives. That included income tax rebates which go beyond the governor’s budget.
The package that passed in the House also includes the governor’s cut to the state’s business equipment tax, but only half of his proposed tax rebate to property owners.
Passing the bills out of the House was one of the first major steps in forming the state budget that will continue in the coming weeks. Other pieces of the governor’s plan, like his proposed child tax credit, are early in the process.
Some Republicans are questioning the addition of new tax credits, like those for families with young children, after lawmakers make changes to the Montana tax code in 2021.
A policy approved by lawmakers that year will eliminate taxes on an individual's first $14,000 of income, starting in 2024.
“And so some questions of ‘wait a second, we just spent time cleaning up the tax code, removing all of these carve outs for tax credits, and here, now we’re going to put in some more,’” Republican Speaker of the House Matt Regier, from Kalispell said.
After legislative Republicans cut in half Gianforte’s proposed one-time tax credit to property owners, the governor called out the lawmakers by name in a press conference as he told them to advance his agenda.
“My message is very simple,” Gianforte said. “It’s like, consider the plan, modify it if you must, get it to my desk. Because we need to get the relief to Montanans.”
The state Department of Revenue expects about 290,000 households would be eligible for the governor’s proposed property tax rebates.
Other Republicans don’t agree with the amount of funding the governor has planned for targeted areas of the economy.
Rep. Llew Jones, a Republican from Conrad, is chair of the House Appropriations Committee. He indicated lawmakers may want to spend more than the governor on Medicaid providers who serve low-income adults, the elderly, children and people with disabilities. An independent study found they’re underpaid by tens of millions of dollars when compared to market rates.
“The governor proposes a budget, and in some of these areas there were some concerns that with the inflation we’re having today and the shortfall of workforce in certain areas and some of the providers closing, there may be areas that are understated,” Jones said. “Now there are potentially some areas that are overstated, too, we’ll have to see.”
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Democrats in the superminority argue much of Republicans' plans for the budget surplus aren’t targeted for people most in need of it.
For example, Rep. SJ Howell from Missoula is bringing a bill to expand eligibility for a scholarship for parents to pay for child care, a sector not directly addressed in Gianforte’s budget. Howell said the proposal “intends to put our money where our mouth is in terms of supporting the working families in Montana.”
According to an analysis from the Montana Budget and Policy Center, Gianforte’s proposed income tax cut will equate to about $70 for families that make between $43,000 and $67,00 a year. The organization, which advocates for policy to help low-income residents, found that the top 1% of Montanans will receive a $6,000 annual tax cut from the policy.
Budget proposals from Democrats aren’t gaining much traction and face a steep path in the GOP controlled statehouse.
Republicans say their package of tax breaks include benefits for all Montanans.
The governor is proposing to expand the state’s Earned Income Tax Credit from 3% of the federal level to 10% of the federal level. That would benefit low-to-middle income households making less than around $60,000 a year.
“We might see some folks come in who are concerned that we’re going to benefit the top earners in the state. And I think that’s why the governor’s office has been looking at both ends of the spectrum,” said Republican Sen. Becky Beard from Elliston who is carrying the Earned Income Tax bill.
What one family sees
When Kumaewa starts doing the math of how these policies will impact her family, she sees some benefit, but she’s unsure how much it will help.
The governor’s income tax proposals could give between $70 and a couple of hundred dollars back to Kumaewa.
“It could be helpful for a lot of families and I wouldn’t want to discount that, but I just wonder if there would be a more impactful way to create sustainable change in the wealth gap,” Kumaeva said.
Because Kumaewa rents and doesn’t own her home, she wouldn’t see the $1,000 tax rebate homeowners could get from the package.
Her family also wouldn’t benefit from the governor’s proposed child tax credit. Kumaewa and her husband’s combined income is just over the $50,000 maximum threshold for households to qualify.
Kumaewa left her old job as a caregiver for adults with disabilities because the pay was too low, even though it came with good health insurance and security. She says she would return to that job with Opportunity Resources if she could.
“I would love to, but they would have to increase provider rates and somehow also make child care more affordable,” she said.
Lawmakers and the governor are still at odds over how much to increase those rates. Gianforte has proposed filling about a third of the identified gap in pay.
As Kumaewa watches the debate in the Capitol she hopes the people in charge of setting state policy keep in mind the many realities Montanans face.
“The people that make the rules are just living in a world that doesn’t exist for everyone else,” Kumawea said. “And so it’s got to be hard for them, it must be hard to understand why people need more representation and more help.”
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