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HELENA - Montana's grim budget picture worsened Friday when the Legislature's chief revenue forecaster predicted state revenue collections will be $85 million less over three years than what he projected a month ago.

That's the second time in two months that Terry Johnson, a principal legislative fiscal analyst, has had to lower projected revenue estimates. In December, he reduced the revenue estimate set by a legislative interim committee by $135 million. His revenue estimate reductions in the two months total $220 million.

The lower revenue numbers, if adopted by the Legislature, will force committees to further reduce agency budget requests.

The Montana Constitution requires a balanced state budget. As a result, the Legislature must balance state spending it approves for the next two years with the anticipated tax revenues for the same period.

Anticipated drops

In his latest report, Johnson cited anticipated drops of $41 million in individual income tax collections for fiscal 2009, 2010 and 2011 to top the list, followed by a $33 million reduction in oil and production taxes.

He also forecast that corporate income taxes will tail off by $16 million over the three years, metalliferous-mine taxes by $6 million, federal mineral royalties by $2 million and property taxes by $2 million. The only category to show an increase was treasury account interest, which was up $15 million over his December projection.

Johnson's recommendations will go to the House Taxation Committee, which will recommend a revenue estimate for fiscal year 2009, which ends June 30, and the next two years.

The bill will then wind its way through the system.

With the latest cuts in revenues, Johnson is projecting state general fund revenues from selected sources will total $4.032 billion for the three-year budget period as opposed to the $4.252 billion that the legislative panel recommended in November.

Johnson said he relies on a lot of economic indicators, an international economic consulting firm and tax collections to date. He said he's feels "pretty good" about his current predictions.

"But there's a lot of unknowns that could happen fairly quickly," he said. "One of them is the federal stimulus package that's floating through Congress."

Revenue projections

Johnson plans to update his revenue projections again in mid-February, with more tax payments being reported and additional information available from the consulting firm.

Meanwhile, Gov. Brian Schweitzer's budget director, David Ewer, said he, of course, had read Johnson's report. Ewer's office comes up with its own revenue estimates.

"We're continually reviewing our revenue estimates," Ewer said. "We're not changing our budget recommendations at this time."

Ewer said Johnson's report acknowledged that there are items to keep watching.

"It is somewhat early in the process for deciding final revenue estimates," he said.

Schweitzer was required by law to make his budget proposal public by Nov. 15, 2008.

He issued a revised budget on Dec. 15 that cut state general fund spending by $145 million because of falling revenues.

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