HELENA — A bill heard Wednesday would let Montanans vote next year on whether they want to receive refunds of surplus state tax collections if those collections exceed a certain trigger.
Senate Bill 426, by Sen. Joe Balyeat, R-Bozeman, told the House Taxation Committee that his bill, dubbed the Treasure State Taxpayer Dividend Program, puts a referendum on the November 2012 ballot. He called it good politics and good policy.
"If there is no excess revenue, there's no commitment and no cost," he said.
However, one opponent, Tara Veazey, executive director of the Montana Budget and Policy Center, said these ending-fund balances or surpluses have served as the state's rainy-day fund when times are tough. Montana is one of only five states without a rainy-day fund set aside to cushion the blow when times are tough, she said.
Balyeat said he modeled he idea somewhat after Alaska's Permanent Fund Dividend, where each adult and child living there receives a dividend check from the state government.
Here's how Balyeat said it would work:
If Montana's tax collections exceed the budgeted revenue estimate by more than 106 percent, the excess over 106 percent would be shared with taxpayers. Half of the excess over 106 percent would be returned to taxpayers, in direct proportion to their property taxes and income taxes paid, while the other would remain with state government.
The government also would keep the 6 percent of revenue above the budgeted revenue estimate.
The bill would return the money to the Montanans through income-tax credits, which are dollar-for-dollar reductions of their tax liabilities.
Sixty percent of the money would be sent back to individual taxpayers based on the amount of property taxes they paid on an owner-occupied home and up to five acres, while 40 percent would be returned to individual based on state income taxes they paid.
He said the bill would keep the Legislature from using unexpected windfalls of tax revenue to fund the expansion of government programs.
"I'd argue that that's the very best thing you can do from a policy perspective with one-time windfall revenue — give it back to the taxpayers — or at least half of it," Balyeat said.
House Majority Leader Tom McGillvray, R-Billings, said the only way to halt the expansion of government is to provide for these automatic refunds to taxpayers when the surpluses are larger than expected.
"In my four terms in the Legislature, I have seen one (new) program after another program develop," he said.
However, Veazey said Montana needs the cushion of these funds in tight times.
"Really, the only mechanism Montana has to cushion us is our beginning-fund balance," she said, referring to the money that comes from the previous budget period's ending fund balance.
For example, she said, at the end of a special legislative session in 2007, the Legislature anticipated a surplus of $125 million two years later. At the end of fiscal year 2009, however, the surplus was three times more than anticipated, or $369 million, she said.
The big surplus allowed the 2009 Legislature to leave a historically large $280 million ending-fund balance for the next two years, which Veazey said was crucial for the state during the recession. It prevented the state from having to make $125 million in cuts to human services and education budget, she said.
Diane Fladmo, research director of MEA-MFT, also opposed the bill.
"I believe it diminishes the discretion of elected officials," she said, adding: "It's important that you retain your options."