Clashes over how to manage state's budget in pandemic continue

Clashes over how to manage state's budget in pandemic continue

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The Montana State Capitol in Helena.

The Montana State Capitol in Helena.

While everyone agrees Montana will see significant budgetary challenges from the economic fallout of the novel coronavirus, there's division among Democrats and Republicans in the state over how severe it will be and how to respond.

That was illustrated Wednesday as the half-Democratic, half-Republican legislative interim Revenue Committee divided on and ultimately ended up not sending a letter to Democratic Gov. Steve Bullock calling on him to make budget cuts before the end of the fiscal year, which is in June. 

Still, Republican lawmakers in leadership positions in the state House and Senate sent Bullock a letter of their own a day earlier, asking him to "immediately" make reductions of 5%, 10% or even up to 15% to meet the projected revenue downfall that one national organization, Moody's Analytics, is making for Montana.

Bullock and his budget staff have repeatedly said it's too soon to make reductions given a lack of complete information and that the national firms aren't accounting for Montana-specific actions in their models. The administration has also said it would be shortsighted to reduce government services when demand is higher than it's ever been for things such as assistance navigating unemployment benefits.

The letters are more symbolic than anything else and serve as a way to show constituents a view or ideology. They also illustrate the increasing return of politics to the pandemic, something political watchers say was expected over time and as economic pressures mount following measures to slow the spread of the coronavirus.

While successful from an epidemiological standpoint, things like the four-week stay-at-home order that lifted April 26 have dramatically hurt the state's economy. The same group of lawmakers that sent Tuesday's letter also wrote Bullock in mid-April asking him to lift that order.

Bullock's budget director, Tom Livers, gave the Revenue Committee a report Wednesday about his projections for the state. He again said he expects Montana to have about $113 million in the bank at the end of the next fiscal year, which is in June 2021.

That includes a 2.8% drop in revenues for the current fiscal year ending June 30, and a 8.7% drop in the next fiscal year.

The state's financial position going into the pandemic "allows us to maintain a level of government spending that's a critical component at this early stage of economic recovery. It gives us time to monitor the rollout of federal relief resources and deploy those resources quickly," Livers said.

Montana would also have access to $92 million in the budget stabilization reserve fund if the general fund balance dips low enough, and another $25 million if triggers are hit requiring cuts.

Lawmakers in the 2021 Legislature will be be crafting the next two-year budget in January-April in the coming fiscal year and Bullock will no longer be in office as he terms out at the start of next January.

While acknowledging his model is perhaps less severe than that of Moody's, Livers said national outfits do not account for local actions such as a more aggressive reopening timetable in Montana, as well as the direction to agency leaders to save money by holding jobs open if possible, and more.

Still, he acknowledged Montana is especially vulnerable to decreases in the state's tourism economy.

The Revenue Committee also heard from Patrick Barkey, the director of the Bureau for Business and Economic Research at the University of Montana, who presented a more bleak version of a report he authored in April.

The update includes worsened projections for jobs lost, going from 51,000 to 75,000. Barkey emphasized that he was not providing a revenue estimate Wednesday, but told lawmakers a $180 million drop in income tax revenue was possible based on data he's reviewed.

Still, he said, the data he's able to access now to build projections, while able to provide an indication of the magnitude of the pandemic's effects, is less reliable for crafting predictions.

"The big picture remains pretty grim," Barkey said.

One of the signers of the Tuesday letter, Speaker of the House Greg Hertz, R-Polson, gave public comment Wednesday saying that while it's not clear where Montana is heading in terms of revenues, he wants to see budget reductions now.

"The sooner we prepare, the better we are," Hertz told the committee. " .… The longer we wait until we see good numbers, the more difficult it's going to become."

While the committee also decided not to sent a letter to the state's congressional delegation, Hertz said he'd like to see more flexibility from the federal government in how funds it provides as aid to states can be used.

As of now, the $1.25 billion Montana received from the federal CARES Act cannot go toward replacing lost revenues, but Livers said governors from both sides of the aisle have been pushing Congress for that ability, or money in additional packages.

Democratic state Sen. Dick Barrett, of Missoula, said cuts would cause more harm to the recovery than help in balancing the budget.

"We are shutting down government at the same time that we are trying to reopen the economy," Barrett said. He added the state's reserves were set aside for times like the pandemic.

"That's the reason we have these revenues, is to be able to maintain spending during a downturn," Barrett said. " … I think urging the governor to cut spending at this juncture is extraordinarily ill-advised."

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