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HELENA – As Gov. Steve Bullock and legislative Republicans get down to crafting the state budget, they’ll do battle over a two-year, $11.5 billion spending proposal from the governor, crammed full of some big increases for health care, schools, state colleges, public employee compensation and infrastructure.

Bullock, a Democrat, acknowledges that he’s asking for some substantial spending increases, including approval of $750 million in federal funds for expanding Medicaid, the health insurance program for the poor.

Yet he says with the state’s finances in good shape, there’s no reason Montana shouldn’t use its available money to bolster vital programs and obligations that need patching up – as well as offer a tax rebate for homeowners.

“At times like these, I want to have an opportunity to invest some (money), and we’ll return some and we’ll save some,” he said in an interview last week.

Even with an $11.5 billion budget that increases overall state spending by 13 percent over two years, his budget balances and the state still has $300 million left as a cushion by mid-2015, the end of the budget period, he notes.

“We’re not spending more than we’re bringing in, and we’re going to insist there is structural balance,” Bullock said.

Of course, Bullock’s proposed budget can’t be enacted without approval of the 2013 Montana Legislature, which is controlled by Republicans.

GOP leaders say they expect to pass a budget that increases state spending on public schools, colleges, pay for state employees and other items.

But they also say they’re unlikely to give a green light to the entire budget, saying they’re worried tax revenue and federal money won’t be able to sustain the level of spending requested by Bullock into the future.

“I think there probably will be some increases; there always is,” says Sen. Rick Ripley, R-Wolf Creek, chairman of the Senate Finance and Claims Committee. “But I don’t think they will be on the magnitude of 8 percent to 12 percent. There has to be a compromise somewhere.”

Republicans have a 29-21 edge in the Senate and a 61-39 margin in the House.

House-Senate budget panels, which are controlled by Republicans, began their scrutiny of the Bullock budget last week and will craft an initial draft by late February. The main budget bill and related spending measures then must work their way through the full House, Ripley’s committee and the full Senate, before reaching Bullock’s desk for his signature.

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Highlights of Bullock’s proposed state budget include:

• The $11.5 billion is a 13 percent increase over the current two-year budget of $10.15 billion. Also, about half the money is federal dollars, the bulk of which goes to health care, welfare, education and highway construction programs. State taxes and fees provide revenue for the rest of the budget.

• The largest increase is for human-service spending, which climbs from $3.7 billion to $4.75 billion, or nearly 30 percent. A big part of this increase is Bullock’s proposal to expand Medicaid, which by itself adds $750 million in federal funds over two years.

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• Bullock wants to increase pay for state employees and shore up pensions for these and other public employees, including teachers, at a two-year cost of $210 million.

• Public schools and the state university system would get increases in state funding, including a $45 million, 9 percent increase for the university system, in part to freeze student tuition the next two years.

• The Bullock budget would add 184 full-time employees to the state payroll, with most of those increases in six agencies or areas: Corrections, Public Health and Human Services, the Public Defender’s Office, Transportation, Revenue and the state judiciary.

• Finally, Bullock’s budget includes a one-time, $400 tax rebate for homeowners, and the elimination of property taxes on the first $100,000 worth of equipment for all businesses.

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These rebates and cuts are financed by the state treasury, and thus show up as $110 million in “spending” in Bullock’s budget.

Bullock says that’s a misnomer, and that most people won’t consider that government spending.

“I don’t think the guy down the street is going to call getting a $400 check a government spending increase,” he says.

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Senate Minority Leader Jon Sesso, R-Butte, who sits on the Senate Finance and Claims Committee, says Bullock’s budget makes good sense and good public policy.

The past four to five years of state spending in Montana have been “pretty austere” and it’s time to invest in education, infrastructure and other programs that ultimately help the economy, he says.

Sesso also says the federal dollars flowing into Montana, for health care, welfare, highways and other programs, are vital for the economy and helping the “least advantaged among us,” and shouldn’t be devalued.

“That is the system that is in place today,” he says. “I am not going to be an advocate of turning our back on dollars that relate directly to jobs and stimulating our economy here in Montana.”

Republican lawmakers, however, say they’re concerned that as Congress and President Barack Obama strive to get control of federal debt, the flow of federal money for many programs may dwindle, and that Montana shouldn’t become overly dependent on that cash.

“I’m still concerned – can we sustain that level of growth (in spending) in the future?” says Sen. Dave Lewis, R-Helena, another Finance and Claims Committee member and a former state budget director.

“It’s almost like (Republicans and Democrats) come from different sides of the moon,” he says. “As conservatives, our first reaction is, we have to be able to sustain this into the future. The other side says, ‘My god, we’ve got to spend everything because we’ve been on such short rations.’ That’s going to be the heart of the argument.”

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