HELENA — A bipartisan legislative committee on Friday endorsed a more conservative estimate of state tax collections than the Schweitzer administration proposed over a three-year period.
The Revenue and Transportation Interim Committee, unanimously endorsing its staff's recommendations, agreed on a revenue estimate that is $45 million lower than Schweitzer's budget office proposed over the period.
The revenue estimate becomes a critical number when legislators in January begin setting the state budget for the next two years. Montana's Constitution says that state general fund spending can't exceed the estimated revenues. The Legislature can modify revenue estimates during the session.
Gov. Brian Schweitzer later blasted that legislative panel's decision. He criticized lawmakers for relying too much on revenue forecasting and economic modeling that he said has been inaccurate in the past.
“What are you going to believe?” he asked in an interview. “All of these modeling numbers that have been wrong for the last 10 years or your own lying eyes? Their estimates not only have been wrong, but wildly wrong.”
The immediate effect of the legislative committee's decision Friday was to lower to $84 million Schweitzer's proposed general fund budget balance, or surplus, as of mid-2013. On Monday, Schweitzer had pegged the surplus at $129 million.
If lawmakers want to restore that surplus to his original figure, they will have to find $45 million in budget cuts or tax increases. Leaders of the Republican-controlled House and Senate have made it clear they are looking to cut budgets, not raise taxes.
The governor's budget office forecast state tax collections to $5.297 billion, compared with the $5.252 billion projected by the Legislative Fiscal Division for fiscal year 2011, which ends in mid-2011, and fiscal years 2012 and 2013.
Legislators defended their decision.
“I think it's the most conservative approach,” said incoming Senate President Jim Peterson, R-Buffalo. “Everyone's taking the most conservative approach right off the bat.”
Although Sen. Ron Erickson, D-Missoula, questioned some of the legislative economic assumptions, he said he voted for it because the committee always supports its staff on the revenue estimates.
Rep. Dick Barrett, a fellow Missoula Democrat, said he's hopeful that revenue estimates can be adjusted upward if revenue collections and projections continue to show improvement.
The governor's budget director, David Ewer, had said state tax collections in August, September and October are up by more than 11 percent overall, a sign that the economy is bouncing back after the recession.
“Come January, I think we have a significant likelihood of upside revenue estimates,” he told the committee, adding: “If we're still cooking along at 10 or 11 percent (gains), we're going to be off $100 million.”
If state tax collections continue increasing at the present clip, Ewer said, he would ask that the Legislature boost the revenue estimate to reflect the improved economy.
“We see an economy that's coming back,” Ewer said. “And the numbers themselves say that. That's the most important data point of all.”
Terry Johnson, the Legislature's chief revenue forecaster, disputed Ewer's approach, saying, “You can't pick off one variable (and use it).”
He did agree that Montana is experiencing a “slow, gradual recovery,” but warned: “It's going to take till 2015 to achieve the same level of revenue that you got in 2008.”
Amy Carlson, the state's chief legislative fiscal analyst, defended her office's forecasting approach. She said the legislative staff re-examines every economic model every two years to find improvements.
Carlson, who previously worked for Schweitzer's budget office, warned against using year-to-date numbers as Ewer did.
“I've been burned by them personally,” she said.
Paul Polzin, of the University of Montana Bureau of Business and Economic Research, said Montana is in an economic recovery.
“We are right close to a turning point,” he said. “We are probably not going to experience a double-dip recession at the national level.”