The governor's budget director is recommending the state reduce spending by $229.3 million, mostly leaving in place cuts proposed by state agencies asked to trim their budgets 10 percent, but lessening the blow for some firefighting and tax collection programs.
Two weeks ago state agencies submitted proposals of how they would make the 10 percent cuts. Tuesday's recommendations weren't the salvation some programs on the chopping block hoped for.
The reductions are necessary because of lower-than-expected state revenue due to lower income tax collections, which are down about $70 million from what was projected. There also has been a reduction in tax revenue from natural resource extraction, and the state is experiencing high expenses fighting wildfires that have torched more than 1 million acres this year.
Montana’s Constitution does not allow the state to operate in the red and gives the governor authority to make mid-year reductions. The state has to have an ending fund balance, or cash in the bank, of $143 million at the end of fiscal year 2019.
The cuts at this point are proposed. Gov. Steve Bullock still needs to hear the recommendations from a legislative finance committee before he could enact any reductions. That could happen as early as Oct. 5, but timing is unclear. The longer the governor waits to make cuts, the steeper they may have to be.
Bullock, a Democrat, said he had deep concerns about the cuts.
“I will be reviewing these recommendations in the next days and weeks, but it remains my hope that both Democrats and Republicans will continue to work with me to find more responsible solutions.”
Tuesday's recommendations from Dan Villa, the budget director, eased off the most on the Department of Natural Resources and the Department of Revenue, which would see their budgets trimmed 5.39 percent and 8.69 percent respectively. Almost all other agencies would see their budgets cut 9.57 or 10 percent, except the Department of Military Affairs, which will see an 8.2 percent trim.
Villa recommended against Department of Natural Resources proposals to:
• Trim the number of wildland fire engines on the drawing boards because the cuts would have reduced resources for county fire departments that work with the department statewide and slowed response to wildland fire emergencies.
• Eliminate replacement of a system used to coordinate firefighting.
• Reduce money for air operations to fight fires.
• Cut vehicle purchases for the forestry program.
• Reduce grants to help build partnerships to fight wildfires.
Montana is in the midst of what’s expected to be the most expensive fire season in the state’s history. Lawmakers in the spring voted to slash the fire fund from $62 million to around $30 million if revenue came in lower than expected, which happened. The state is expected end up about $25 million to $45 million short on being able to pay the bill for fighting fires all summer.
While the Department of Revenue can spend money set aside for next year's fires, that could leave the agency in trouble for next summer’s fires.
On Tuesday, Bullock discussed the need for calling lawmakers back to Helena for a special legislative session to address how to pay for fire costs.
“At some point a special session may be necessitated just to address the fact we’ve got to pay for these fires,” Bullock said. “Some time before 2019 certainly.”
The budget director also lessened the blow to the Department of Revenue. That department's proposed reductions included cutting more than 100 positions, which it said would severely limit its ability to collect taxes that keep the state operating.
Villa did not recommend cuts suggested by the department in the Business Income Taxes Division, which would have resulted in nearly 50 full-time equivalent positions lost.
The majority of the cuts hit the areas that rely on the state’s general fund dollars the most, the Department of Public Health and Human Services, the Department of Corrections and state’s university and K-12 education systems.
The health department will trim $105 million over two years, or 10 percent. That results in a loss of $136 million in federal funds that matched state dollars.
“When you talk about a 10 percent division-by-division cut, there’s no way to do that without impacting federal dollars,” Bullock said Tuesday.
Though some of the budget director’s recommendations make tweaks to the agency's proposed cuts, to get to the dollar reductions needed, many of the department's original proposals were left in place.
That means if cuts are made following the recommendation, public assistance offices around the state will still close, mandatory employee furloughs will take place across the department, targeted case management services would be eliminated, early childhood intervention programs would no longer be funded and Medicaid reimbursement rates for critical access hospitals would drop.
Bullock has the ability to call legislators back to Helena for a special session to explore raising taxes to help offset the cuts. Before the Legislature convened in January, the governor proposed $280 million in new revenue in the form of several new taxes or tax increases, but a Republican-dominated Legislature shot most of those pitches down.
It’s unclear if the Legislature's appetite to increase taxes has changed as the state burned through the summer and revenue came in much lower than expected.