HELENA — With Republicans spearheading the effort, legislators are seeking to cut taxes by nearly a half billion dollars.
Yet the chances of many of these bills passing may be fading as the state budget’s projected ending fund balance drops.
Bills are still alive to reduce property taxes, lower individual and corporate income taxes and cut business equipment taxes. Many are similar, doing the same thing but in different ways and levels.
Few are one-time tax decreases. Most would be “permanent,” or, if they pass, they would remain on the books until a future Legislature changes them.
Democrats also have dropped in some tax-cutting bills, but far fewer than Republicans bills. With Republicans holding the majorities in both legislative chambers, theirs figure to have the best chance of passing.
When legislators convened in January, they were looking at a projected state general fund ending balance of $466.9 million as of mid-2015.
That projected balance had dropped to $291.4 million, according to an update last week by the Legislative Fiscal Division.
What’s more, the budget no longer is structurally balanced, the division said. That means the Legislature at this stage is proposing to spend more than the state is expected to collect in revenues for the two years. The projected imbalance is $64.3 million at the end of fiscal 2014 and $63.9 million a year later.
The next few weeks will be critical for the Legislature in making the preliminary spending and tax decisions to balance the budget. The House must send all spending bills to the Senate by March 28. The House and Senate must send any tax bills to the other chamber by April 5. Lawmakers are scheduled to adjourn on April 27.
Democratic Gov. Steve Bullock, who will have the final say, said he proposed a budget that’s sustainable, with a recommended $300 million ending fund balance in mid-2015.
Asked about the tax-cut bills, Bullock said, “I’ll critically look at this, but a half a billion dollars certainly isn’t sustainable.”
Bullock said he proposed “reasonable” tax bills that would benefit Montana Main Street and homeowners.
The House Taxation Committee tabled his bill to eliminate the business equipment tax on businesses with $100,000 or less of equipment. It hasn’t voted yet on his proposed one-time, $400-per-homeowner property tax rebate, which costs $99 million.
“The standards of fiscal prudence going forward and insuring that it impacts Main Street will sort of be my guide star,” he said.
Senate Taxation Chairman Bruce Tutvedt, R-Kalispell, said while the budget isn’t structurally balanced, legislators can change some moving parts to bring it into balance.
“I thought we had $50 million a year that we could maybe do in tax cuts, and I think that is getting smaller,” Tutvedt said. “My goal is to prioritize these tax-cut bills to fit the budget, and I don’t plan on sending anything, or very, very few, that will ill affect our structural balance.”
Tutvedt said his top goal is “permanent property tax relief.” He prefers the school funding overhaul by Sen. Llew Jones, R-Conrad, because it meets equalization tests.
He also would like to see an income tax simplification bill pass, either his or one of two in the House.
One Democrat on the Senate Taxation Committee, Sen. Dick Barrett of Missoula, said the legislators will face some difficult choices.
“Obviously there’s no room at all for another $400 million or $500 million worth of tax cuts,” said Barrett, a retired economics professor. “In fact, we have to go the other way. So the problem we face is just how much tax-cutting can we do and have structural balance. What’s the number? The other question is in what form should they come.”
He added, “If we want all the expenditures we’ve got at this point, then we’re under water by 60-some million dollars, and we can’t even afford the tax cuts we’ve got in the budget, let alone additional ones.”
On the House side, Taxation Chairman Mike Miller, R-Helmville, said he isn’t sure yet how much in total tax reductions and which tax-cutting bills he wants to send out of committee. Any that pass out of the committee eventually will go to House Appropriations Committee for review.
“It’s kind of up to Appropriations and leadership to put priorities on them,” he said.
As for his own opinion, Miller said, “Personally assuming we had about a $500 million ending fund balance, I would like to see $200 million or $300 million go back to taxpayers and maybe a one-time payment kind of thing.”
Miller supports an ending fund balance of $150 million, or half of what Bullock wants. The House chairman advocates using some of the difference to pay cash to build some new college and university facilities and repair others, instead of borrowing money through bonds to fund them.
A Democrat on House Taxation Committee, Rep. Tom Jacobson of Great Falls, has been raising concerns about the overall cost of all the tax-cutting bills and their impact on the budget.
“We kick it down to Appropriations, as we say, and let them sort it out,” Jacobson said.
That should be the job of the Taxation Committee, he said.
Six subcommittees of House Appropriations and Senate Finance and Claims review the spending requests of various agencies and forward their budget recommendations to House Appropriations.
Jacobson said he’d like to see similar joint committees of the House and Senate Taxation committees review tax proposal by area and come up with an overall strategy for taxes. One could look at corporate tax bills, another could review individual income tax bills and one could study property tax bills.
“The only criteria we have is if they cut taxes, we should approve it,” he said. “And then it gets sent to Appropriations and they decide.”