HELENA — A number of state government departments will outline today how they will cut their general-fund budgets for various programs by 5 percent, if necessary.
Gov. Brian Schweitzer, through Budget Director David Ewer, asked agencies three weeks ago to come up with these contingency plans because of declining state tax collections.
Here is an explanation of what’s happening in question-and-answer format:
What happens today?
Certain executive branch agencies must turn in their plans detailing how they would cut their budgets. Agencies will submit their plans to the governor’s Office of Budget and Program Planning and to the Legislative Fiscal Division.
There is no immediate action planned on the proposed cuts.
In addition, Ewer may say that he anticipates that a general-fund deficit will exist by June 30, 2011, the end of the current two-year budget period. A deficit, by law, exists if the projected ending-fund balance or surplus in this case is $36.8 million or less by mid-2011. That’s 1 percent of the $3.68 billion, two-year general-fund budget approved by the 2009 Legislature.
Based on projections by Terry Johnson, the Legislature’s chief revenue forecaster, a certification would appear likely. In early January, Johnson estimated that the general-fund balance would be $16.9 million by mid-2011. That’s a fraction of the projected $282.4 million surplus set by the 2009 Legislature in late April 2009 and a further deterioration of the $44.4 million surplus he projected in December.
If Ewer determines a deficit exists, Schweitzer then must order spending reductions to provide that the projected ending fund balance is at least $36 million. State law empowers the governor to unilaterally cut up to 10 percent of the general-fund budget for any single government program.
Schweitzer also can order cuts in any other general-fund spending not exempted by the law, including the main budget bill (House Bill 2), any other appropriations bill (including HB645, the bill appropriating federal stimulus money) and from certain other sources.
However, Schweitzer cannot order any reductions until after legislative hearings, even though the Legislature has no power to stop the cuts.
Why is there a problem with the state budget?
State tax collections have tailed off considerably during this recession. Johnson has projected state general-fund tax collections for the two years will be $270.5 million less than what the 2009 Legislature expected.
Are all agencies subject to these potential cuts?
No. The law specifically exempts the legislative and judicial branches, the Montana School for the Deaf and the Blind, payments on state debt, salaries of elected officials and public-school base funding. Ewer has said these exemptions shield about 35 percent of the general-fund spending from reductions.
By law, Schweitzer cannot order executive agencies headed by other state elected officials or the Board of Regents to cut their expenditures by more than the average reduction percentages imposed on all other executive branch agencies.
How much is eligible to be cut in what agencies under Schweitzer’s 5 percent guideline?
The Legislative Fiscal Division has calculated that the proposed 5 percent cuts would amount to $47.8 million, if they are made. Here’s the breakout by agency:
Public Health and Human Services, $19.1 million; Corrections, $8.6 million; Higher Education, $7.6 million; Office of Public Instruction, $4.3 million; Revenue, $2.6 million; Justice, $1.3 million;
Natural Resources and Conservation, $1.1 million; Public Defender, $998,430; Administration, $314,986; Governor’s Office, $307,101; Military Affairs, $291,258; Environmental Quality, $287,885;
Commerce, $240,700; Library Commission, $138,958; Historical Society, $136,852; Labor and Industry, $130,636; Crime Control, $119,719; Livestock, $69,048;
Agriculture, $67,704; Political Practices, $23,044; Arts Council, $23,010; and Board of Public Education, $11,379.
What happens next?
The governor’s Office of Budget and Program Planning will review the proposed 5 percent cuts and consider any other alternatives. By Feb. 19, Ewer will make his recommendations on spending cuts and send them to Schweitzer.
On Feb. 18-19, the Revenue and Transportation Interim Committee will review and comment on the revenue estimates from the governor’s budget office.
On March 4, the Legislative Finance Committee will conduct public hearings on any proposed spending reductions by the Schweitzer administration. On March 5, the committee will comment on these proposals. However, the committee has no power to stop any reductions.
Schweitzer can’t legally order any spending cuts until after the Legislative Finance Committee concludes.
Is that the end of it?
That’s hard to say. In the past, some governors have ordered the cuts, only to see the budget problems worsen. Some governors then have called the Legislature into special session to make further cuts.