State-revenue rebound could lead to undoing budget cuts this year

Posted at 4:42 PM, Jun 18, 2018
and last updated 2018-06-18 18:42:10-04

A rebound in Montana’s state tax revenue could lead to undoing $46 million in state budget cuts later this year, a legislative report says – although lawmakers Monday said the final budget picture won’t be clear until next month.

Still, a leading Republican lawmaker told MTN News Monday that if the revenue forecasts come through, the offsets to earlier budget cuts would be significant.

“The money would go back in the same proportions that it was taken out during the (November) special session,” said Rep. Nancy Balance, R-Hamilton, who chairs the Legislative Finance Committee. “So, it’s huge. … This could have a very big effect on some of the cuts we’re seeing.”

The Republican-controlled Legislature cut nearly $80 million from the two-year state budget last November, in response to lagging tax revenue. Democratic Gov. Steve Bullock’s administration proposed some of the cuts.

But the Legislature also passed a law – Senate Bill 9 – that says if tax revenue rebounds past a certain level by this summer, programs that saw cuts will get some money back in fiscal 2019, which starts next month.

The Legislature’s fiscal staff issued a report two weeks ago that says if tax revenue continues on its current pace, that threshold may be exceeded by $137 million.

SB9 says about $46 million of that money will go to state agencies that had to cut their budget this year. The biggest cuts were at the Department of Public Health and Human Services, including programs like mental health and Medicaid, which pays medical bills for the poor.

The rest of the excess money would be paid into state treasury reserves.

Any changes will be determined by the level of revenue at the end of fiscal 2018, which is June 30.

Dan Villa, the governor’s budget director, said Monday he expects revenue to be somewhere above the threshold outlined in SB9.

“We will know in July where we’re at, and that point we will have additional conversations with you about Senate Bill 9 implementation,” he told the Legislative Finance Committee.

Ballance acknowledged that while the restoration money could be significant, some of the cuts that occurred this year can’t be undone in the coming fiscal year.

“There have been changes made structurally within organizations that you can’t just simply undo,” she said.

But she also said the overall budget forecast looks good, setting the state on better fiscal footing going forward.

Final fiscal 2018 numbers on three big tax areas are due this month: Property, oil-and-gas and corporate income taxes.

But legislative staff said data indicate that all three areas will match or exceed estimates from a year ago.