Montana Republican Gov. Greg Gianforte on Thursday released his first state budget proposal, a $100 million reduction over the outgoing governor's proposed spending plan.
The budget is a 1.66% increase over the next two years — a 2.32% decrease in the upcoming fiscal year and 3.98% increase in the second.
Gianforte was sworn in Jan. 4 after winning November's election by a 13-point margin. He campaigned on a promise of freezing state spending and cutting taxes.
The new governor's plan will cut the top marginal individual income tax rate from 6.9% to 6.75%, which Gianforte said would affect half the state's taxpaying residents. The taxable income threshold for people in that tax bracket is $18,400. Taxable income is the part of a person's income that is taxable after any allowable deductions from their gross wages.
"With our budget, Montanans will keep more of what they earn," Gianforte said. "... More than half of Montana taxpayers will see income tax cuts of almost $30 million per year. This is just a first step. As we find greater efficiencies in government and our economy continues to grow, we will continue to cut taxes."
The goal, Gianforte said, is to continue to reduce tax rates over time, in incremental steps.
State Senate President Mark Blasdel, R-Kalispell, said in a statement Thursday his caucus would engage with Gianforte as the Legislature starts its budgeting process in earnest in the coming days.
"Senate Republicans look forward to reviewing Gov. Gianforte's budget proposal in detail and working with the governor to enact a conservative budget that includes Republican priorities," Blasdel said.
Democratic leadership said they would work to direct tax breaks to the middle class.
"The governor's proposal is the starting point of a lengthy legislative budget process," said a statement from minority leaders Rep. Kim Abbott, D-Helena, and Sen. Jill Cohenour, D-East Helena. "Democrats are committed to creating jobs and opportunity for all Montanans, and that means holding the line on unnecessary cuts made on the backs of working families to pay for tax breaks for the wealthy."
Gianforte's budget also proposed eliminating the business equipment tax for roughly 4,000 businesses in the state by raising the exemption from $100,000 to $200,000.
Heather O'Loughlin, the co-director of the left-leaning Montana Budget and Policy Center, said Thursday the income tax cut would equate to a reduction of about $1,314 in the tax bill for the top 1% of those in the state, or people that earn $509,000 or more annually. An analysis of the proposal by the center and Institute on Taxation and Economic Policy found that people earning from $40,000-$63,000 would see a reduction of about $14.
"He is providing pretty sizable tax cuts that are largely going to benefit the wealthy at a time when we have a strained budget and communities are struggling," O'Loughlin said.
Gianforte's office put the overall tax cuts across the proposals at $50 million.
The budget also plans to exempt businesses that create long-term jobs in Montana from capital gains taxes from the sale of employee-owned stock, a proposal that reflects Gianforte's experience in moving to Montana and starting RightNow Technologies in Bozeman. The company eventually employed hundreds and Gianforte sold it to Oracle for $1.8 billion.
"It's a way to try to bring businesses here that wouldn't otherwise come," budget director Kurt Alme said. Businesses would have to create a not-yet-established number of jobs that have longevity, Alme said. He added that though some might criticize the tax breaks, the proposal is aimed at bringing jobs and money to the state that otherwise would have gone to other states with lower capital gains taxes.
There's also an increase in the budget of 25% for funding in the program that helps seniors and disabled veterans offset increasing property taxes.
Another of Gianforte's campaign promises was to raise teacher pay. His budget proposes $2.5 million in incentives for local school districts to boost starting wages. The legislation to do that is not available yet, but Alme said the general idea is to get school districts to negotiate with local unions to bring up starting teacher pay to be closer to that of higher-paid educators. Those that get starting wages close enough to top salaries will get the incentive money, though what that scale will be is not clear.
Gianforte's budget plans to direct $6 million from the revenue expected to be generated from the legalization of cannabis toward substance abuse treatment. That money, along with funds from a major tobacco settlement, will be leveraged against federal matching dollars to put $23.5 million toward the Healing and Ending Addiction Through Recovery and Treatment (Heart) Act proposed by the governor.
"We have gaps in Montana right now," Alme said of available treatment services. " ... We're hoping to be able to close those gaps." The idea is to provide communities with a range of services through the state health department to pick what works best in their area.
The budget also includes money for new district court judges in Flathead and Gallatin County, as well as money for 14 probation and parole workers around the state.
When the initiative to legalize cannabis passed, it included language to put the money toward programs that benefited public lands and access. But a lawsuit filed after the election, claiming only the Legislature can appropriate funds, put the placement of the revenues into question.
Estimates show revenues generated could reach $52 million a year. For now, Gianforte's budget puts the rest of the anticipated money into the state's general fund.
Alme said he expects lawmakers to craft proposals that will change where the money ends up. Advocates for public lands and outdoor recreation were critical that none of the money is directed to public lands.
“Although we're pleased to see Gov. Gianforte’s budget fund many of the state agencies and outdoor programs we care about, we’re disappointed he chose to divert new revenue approved by voters away from our public lands and conservation," said Whitney Tawney, with Montana Conservation Voters. "We look forward to working with the Legislature to restore the much needed funding to protect our outdoor heritage."
Roughly $11 million of the reductions Gianforte proposes come from a two-month pause in the money the state pays as its share of employees' health insurance premiums. There's also a pause in putting money into the retirement fund for judges. Alme said both areas had funding surpluses, and employees would not pay more for their health insurance.
The budget also has a proposal to cut staffing across state agencies by about 4%, saving about $24 million. The budget office did not have a figure for how many jobs that would equate to.
Gianforte also will not use the state plane that past governors have relied on to travel around Montana. Alme said Gianforte, who has vast personal wealth and a personal plane, would foot his own travel bill. The money that would have been spent on pilots and other related costs will go to hiring people to help Lt. Gov. Kristen Juras conduct a review of state agencies looking for places to further trim the budget.
Gianforte's budget doesn't tap any of the pots of money the state set aside in savings, like the proposal from former Democratic Gov. Steve Bullock. Gianforte plans to leave $357 million in the next fiscal year in the state's general fund as a cushion and $304 million in the second.