HELENA - As the 2011 Montana Legislature begins work crafting a state budget, two very clear battle lines are being drawn - on the size and value of government, and the health of the Montana economy.

On one side, we have majority Republicans, who say our economy is fragile, and that government must be held in check, or scaled back, to avoid damaging any recovery.

"I think we're precariously close to that level, and if we don't control our spending and match it up with our economy, we will definitely limit this economy," House Majority Leader Tom McGillvray, R-Billings, said last week.

On the other side, we have minority Democrats and the Schweitzer administration, who say the economy is clearly on the rebound, and that it makes no sense to slash government programs that actually help the economy - schools, the university system, and medical care for the poor, which is millions of dollars poured into every county in the state.

So, who's right? And what will the outcome of this budget debate mean for the citizens of Montana?

We'll come back to that in a minute - but first, a quick rundown on the basic budget numbers, and what each side is arguing.

Schweitzer's two-year, $3.7 billion budget would maintain and slightly increase state funding for public schools and the university system, probably keep tuition increases to a minimum, and increase funding for Medicaid, the state-federal program that pays medical bills for about 100,000 poor and disabled people in Montana.

Yet Schweitzer's budget doesn't quite balance with "ongoing" tax revenue. It uses one-time transfers of pots of money such as the Treasure State Endowment, which funds infrastructure projects.

The governor and his budget director, David Ewer, argue that one-time transfers are often used to balance a budget in Montana, and that an improving economy means more tax revenue will materialize and cover these costs into the future.

Republican leaders, however, say they're not confident the state economy will grow to the extent that it can keep paying for schools, etc., at the level requested by the governor.

They're talking about shaving $350 million or more from the governor's budget - and suggesting this reduction also makes good economic sense, because less government spending and regulation mean more private development.

As for the economic argument, it's clearly debatable.

Doug Young, economics professor at Montana State University, agrees that government regulations can slow development, but says Montana's economic downturn is primarily because of the national recession.

He also says government spending is not necessarily bad for the economy. The real questions, he says, are whether the taxes that fund those services are burdensome or whether the spending is efficient.

On that account, Young notes that Montana is relatively low on the totem pole when it comes to state and local tax burden, and is rated by the Tax Foundation, a nonpartisan but conservative group, as having a very good tax climate for business.

As for the economy itself, Ewer says Republicans are dead wrong, and that it's both nonsensical and a mistake to whack the budget on the false presumption that the economy isn't bouncing back.

National numbers released Friday showed a drop in unemployment and 12 straight months of private-sector job growth for the first time since 2006.

"The economy is beginning to cook," Ewer says.

The only way that drastic cuts make sense is if Republicans want to tear down the public sector - and that's purely a philosophical call, he says.

Ewer says that philosophy ruled in the 1990s and early 2000s in Montana, leading to underfunded schools, double-digit tuition hikes at state universities and overcrowded prisons - problems he says the Schweitzer administration has addressed.

Senate Minority Leader Carol Williams, D-Missoula, agrees.

"If (Republicans) think they have a mandate to cut (human-service) spending so old people can't get Meals on Wheels, or to cut our public-school system by millions of dollars when we just got out of a court suit, that's not what the people of Montana elected them for," she says. "They're just wrong about it."

McGillvray, who has said more government spending means less personal freedom, says the GOP is merely trying to be responsible with the state budget in precarious economic times - and do what it can to scale back government that could be impeding economic development.

"I don't think Republicans are saying we have to cut spending because it will hurt the economy if we don't," he says. "We're just trying to balance the budget, based on on-going revenue. ...

"I think Montana is a great state; don't get me wrong. But can we do better? Absolutely. And that's what we're all about."

Mike Dennison is a Ravalli Republic State Bureau reporter. He may be reached by e-mail at mike.dennison@lee.net or by phone at (800) 525-4920 or (406) 447-4068.

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