HELENA — Gov. Brian Schweitzer ordered executive branch directors Friday to outline by Jan. 29 how they would cut their general-fund budgets by 5 percent, if necessary, because of declining state tax collections.
He told directors to prepare these contingency plans in case his budget director certifies in late January that a budget deficit exists by mid-2011. Budget Director David Ewer said he anticipates making that certification around Jan. 29.
If that happens, Schweitzer will be compelled by law to order the reductions of up to 10 percent in state general-fund spending, with some restrictions. The earliest the cuts could come is probably mid-March, Ewer said, because of notice requirements in state law.
Exempt from these cuts under state law are the legislative and judicial branches, base K-12 and special education funding, interest and principal payments on the state debt, salaries of elected officials and the Montana School for the Deaf and the Blind. Schweitzer, however, urged both of the other branches of government to voluntarily identify 5 percent budget cuts, too.
Ewer said he anticipates that state agencies will find most of their suggested cuts in the budget year that begins July 1 because the current budget year is half over. He also warned that it’s possible that some reductions will be carried forward into the next two-year budget period that begins in July 2011.
Schweitzer, who through Friday already had identified more than $8 million in cost savings, said the administration is looking for more.
“We’re going to chal-lenge every expenditure,” Schweitzer said in an interview. “We’re asking our directors to be creative and find ways of delivering their programs for less money. Every family and small business is doing it, and we think state government ought to do the same.”
Schweitzer added: “There is nothing sacred here. There are no sacred cows. There are no building rentals that won’t be challenged, no phone bills that won’t be challenged, no real estate contracts that won’t be challenged and no energy bills that won’t be challenged.”
On Tuesday, Schweitzer announced that he was going to ask certain agencies to identify the cuts because state revenues are falling behind projected levels.
The next day, the Legislature’s chief revenue forecaster, Terry Johnson, projected that the state surplus as of June 30, 2011, would be $16.9 million out of a two-year general-fund budget of $3.7 billion. The reason for the declining surplus is that actual tax collections during the recession are falling far behind what the 2009 Legislature forecast.
The projected $16.9 million surplus is a fraction of the $282.4 million surplus that legislators had projected for mid-2011 when they adjourned last year. It’s also deteriorated from the $44.4 million surplus that Johnson forecast in his last report in early December.
Ewer sent the official letter to directors Friday and emphasized that the reductions “should minimize the impact to the citizens of Montana.”
If the deficit is certified, Ewer said budgets can be reduced by up to 10 percent per program.
Directors were asked to provide an analysis of the impact of each reduction, a determination of whether the service is required or optional and a statement about its impact on recipients of the service and the state.
“Be prepared to explain why the proposed reductions represent the most reasonable choices for Montanans and why other reductions are not being offered,” he said.
Actual budget cuts, if necessary, couldn’t be put into place until mid-March, Ewer said, because state law requires that they be aired first before the Legislative Finance Committee, which meets March 4-5. The administration intends to notify the Legislature’s Revenue and Transportation Interim Committee of the projected deficit certification before for its Feb. 19 meeting.
The administration is initiating the process of identifying potential budget reductions under a state law that establishes the procedure if the projected surplus by mid-2011 falls below 1 percent of the general fund spending in the two-year budget period. In this case, that would be below $36.8 million.
Under the law, Schweitzer cannot order executive agencies headed by other state elected officials or the state Board of Regents to reduce their spending by more than the average percentage reduction imposed on all other executive branch agencies.
Also on Friday, Schweitzer announced that the state would save $2 million by suspending the purchase of some wildland fire engines and state grants for fire prevention and fuels mitigation.
State Natural Resources and Conservation Director Mary Sexton said there should be little impact on the fire program because of the additional state and federal money the agency received in 2009.