Montana Public Radio

State Budget Can Survive COVID-19 Fallout For Now, Officials Say

Aug 12, 2020

The state’s budget has healthy reserves to make up for revenue shortfalls amid economic fallout due to the coronavirus pandemic, according to state finance experts.

On Wednesday, Legislative Fiscal Division staff presented a report predicting the state’s reserves can cover projected losses through the next fiscal year, but that the rainy day fund will be weaker by the 2023 biennium.

“While we’re going into it with a really strong financial balance, our balances and our reserves, the pressures will be there for the coming biennium,” Legislative Fiscal Division director Amy Carlson said.

According to a staff report, state revenues are expected to come in $300 million lower this year than what was predicted in 2019. However, the state’s general fund balance is at about $452 million, which may be stable enough for the state to avoid dipping into an alternative state savings account.

Carlson noted there is room for error in estimates due to the uncertainty around how the coronavirus pandemic will progress.

Legislative Fiscal Division’s Sam Schaefer said the biggest revenue hits will come from drops in income and corporate tax revenue. Staff predict income tax revenues will fall almost 18% during fiscal year 2021, but they expect that number to rebound fairly quickly.

State expenditures were lower than expected by roughly $40 million. That’s attributed to unspent dollars were allocated to various state agencies.

The Department of Public Health and Human Services had the largest share of unspent funds at roughly $80 million.

The report said an increase in federal match funds coming in saved the general fund $31 million. An additional $48 million went unspent due to lower enrollment in the state’s Medicaid program, and fewer people having elective surgeries the state would have kicked in on.

Tom Livers, state budget director for the governor’s office, said he mostly agrees with the Legislative Fiscal Division findings, with a few minor deviations. The two offices track the state’s finances separately.

His office has been more bullish on state revenues and slightly less conservative on state expenditures, Livers said, although he also noted there’s uncertainty around what impacts are on the horizon.

Democratic Rep. Kimberly Dudik of Missoula is chair of the Legislative Finance Committee and brought up several tax policies she said lawmakers should consider next session to generate revenue and lessen the economic blow of the pandemic.

Her suggestions included an added tax on properties serving as second homes and are unused for most of the year, and revising the capital gains income tax to bring in more money.

“I think we’re all interested in, if we’re going to raise revenue, doing it so it impacts Montana families the least, especially those who are least able to pay any additional costs,” Dudik said.

Republican Speaker of the House Greg Hertz of Polson said there are a number of legislators who don’t believe taxes should be raised during an economic recession.

“During these uncertain times, I think we really need to focus – just like all Montanans are – in reducing our expenditures,” he said.

The Legislative Fiscal Division plans to present a more detailed report on the state’s budget in September.