MTPR

Montana Lawmakers Plan Budget Around Modest State Revenue Growth

Nov 19, 2018

Montana’s Gross State Product, wages and personal income are expected to grow between 3 and 4 percent each of the next few years, according to reports given to lawmakers Monday. That growth rate is slightly below the state’s long-term trend since 2001.

Those reports from the nonpartisan Legislative Fiscal Division drove a projection for how much tax revenue Montana is expected to bring in as lawmakers start building the state’s next two-year budget.

“You can see what we’re calling modest growth,” says Amy Carlson, Director of the LFD.

She says from now through 2021 more growth is expected in state earnings, after revenues declined in 2016 and ticked up only slightly last year.

The LFD’s report on Montana’s economic output says the state’s largest growing sectors are services, trade and government.

While state finances are on a forecasted upward track, lawmakers are taking a cautious approach laying the foundation of the state budget ahead of the legislative session that starts in January.

“We’re operating here in an environment of uncertainty, which we always do,” says Dick Barrett, a Democratic Senator from Missoula.

Barrett was among several lawmakers that recommended guarding the state against possible risk, which in this case means avoiding setting the legislature up to approve spending money the state might not actually bring in.

Analysts said Monday that it is always difficult to project how much the state will earn from its tax on corporations. And it’s even more difficult now because it’s unclear how the new federal tax bill President Trump signed into law last year will change corporate tax behavior.

Recently appointed State Budget Director Tom Livers said this uncertainty about how the tax law will play out means lawmakers should proceed with caution.

“Because of that uncertainty we will advocate for a more conservative estimate from the committee.”

Heather O’Loughlin with the Montana Budget and Policy Center says while there is still some uncertainty about the federal tax law, state legislators are in a more comfortable position now than they were two years ago. Back then even less was known about the federal tax law.

“What we saw in 2016 and through a portion of 2017 was taxpayer behavior coming in a little different than what the previous legislature had projected. And that was largely I think a result of taxpayers holding off on realizing income, waiting to see what Congress would do with a federal tax bill.”

There was little debate Monday about how much revenue will come into the state as the next state budget is built. That’s a pivot from some more politically charged revenue forecast meetings held over the last few years when the Governor’s Office and lawmakers argued over those numbers.

Last year, Governor Bullock called a special legislative session based on his revenue forecasts,| and some Republicans said that might not be necessary.

Heading into the 2019 legislative session all sides are more-or-less in agreement about how much there is to spend, although they’re not likely to find so much common ground on how to spend it.