When the Montana Legislature’s Revenue and Transportation Interim Committee voted on Nov. 19 to accept a three-year state revenue estimate, lawmakers took an important first step toward a constructive 2019 session.
Revenue estimates often are contentious. In the 2017 Legislature, the Legislative Fiscal Division and the governor’s office of management and budget were far apart in their estimates. The Legislature adopted the higher LDF estimate and approved a budget based on that revenue projection, which proved to be too high as energy-related revenues fell. The shortfall triggered cuts in state staff and services and in payments to Montana health care providers. Gov. Steve Bullock called lawmakers to a special session in November 2017 to make more cuts.
But this year, the governor’s budget office, now led by Tom Livers, and the LFD, led by Legislative Fiscal Analyst Amy Carlson, produced very similar revenue estimates.
Each of those estimates runs nearly 200 pages. But the most important takeaway is the agreement on what Montana can expect in tax and fee collections for the remainder of this fiscal year and for the biennium that starts July 1. The Legislature’s most important constitutional duty is to pass a balanced two-year budget.
Carlson told the RTIC that the LFD estimate calls for modest growth in tax collections and interest earnings of 3 percent to 4.2 percent a year.
Individual income tax collections are projected to make up 57 percent of all general fund revenue. Individual income tax collections are expected to increase more than most other revenue sources; more than corporate taxes; more than natural resource royalties; more than property tax collections; more than tobacco, alcohol and gambling tax collections.
“Individual income tax is continuing to grow with the economy, and other sources of income are not necessarily growing with the economy,” Carlson said, as reported by the Associated Press.
“The revenue estimate should be less of an issue, maybe not an issue at all,” Livers told The Gazette last week.
The difference between the two estimates is about $20 million. That is about one-quarter of 1 percent of the projected $7.5 billion in general fund revenue for the three-year period.
The LFD estimate helpfully outlines the history of Montana revenue estimates, which have often sparked disagreement. Four years ago, the governor’s budget office revenue estimate was $295 million over the LFD estimate. By January 2015, the difference between the two estimates ballooned to $358 million. Lawmakers spend many hours poring over the differences and ultimately adopted an estimate that was $232 million above what LFD projected.
It’s hard to make good decisions when the deciders cannot even agree on basic facts. Fortunately, both Livers and Carlson delivered competent analyses that allowed the Democratic governor and the Republican majority legislature to start out with a fundamental agreement on the revenue facts.
There will certainly be arguments over how to spend money and how much to spend. Bullock has proposed some tax increases that are sure to meet strong opposition. Montanans who felt the sting of budget cuts last year will seek to recover services and reimbursement that were taken away.
Montanans will fiercely debate where we go from here. Thankfully, the state’s key budget leaders agree about where Montana is starting out.