Counties Could Face Major Funding Cuts

By Beacon Staff

Unless a federal program is reauthorized, Montana counties just received their last paychecks from a program that provides millions of dollars in funding for the state’s schools and roads, and the northwest part of the state will be hit the hardest.

Flathead County could lose $1.3 million; Sanders County about $1 million; and Lincoln County – facing the largest decrease – stands to lose almost $3.7 million, according to numbers from the Montana Association of Counties.

The funding in question is the federal Secure Rural Schools and Community Self-Determination Act. The legislation was established by Congress in 2000 as a six-year funding cushion for counties affected by declining revenue from timber harvests on federal lands. Congress extended the program in 2006, but only for one year, and despite recent attempts to include the legislation in other bills, it hasn’t been reauthorized.

If the program isn’t renewed, funding will revert back to a previous formula that provided counties 25 percent of revenue from national forest proceeds. The dollar difference between the two systems is considerable: Statewide the 25 percent formula would have meant an 80 percent reduction in funds received last year.

In what MACo’s Executive Director Harold Blattie calls a “double whammy,” losing SRS would also reduce federal money sent to Montana through the Payment in Lieu of Taxes (PILT) program, which pays local governments for lost revenue on nontaxable federal lands.

The total annual loss, Blattie said, of federal payments to Montana counties would add up to more than $15 million – cash normally spent on education and roads.

In Flathead County, the roads department’s budget, already a controversial subject with area residents, will suffer the most significant loss.

Last year, the department received just more than $900,000 in SRS funding, and another $500,000 – allocated by the county commissioners – from the county’s PILT funds. If SRS isn’t reauthorized, SRS payments will decrease by more than 60 percent next year, or about $541,000.

The county’s overall PILT funds would also drop by about $250,000, which depending on how commissioners decide to distribute the monies, could add to the decrease.

At most, the roads department could see about a 20 percent decrease to a budget that already struggles to keep up with rising costs and needs.

“It would amount to a pretty good chunk of the budget,” Mike Pence, the county’s administrative officer, said. “It would mean a reduction in services or less maintenance and improvement projects, whether that means personnel, asphalt or fuel. We’d have to make that decision when it’s in front of us. It’s probably not any one item, but across the board.”

Flathead County schools would fare better. More than half of their SRS payouts go directly to a state general fund. The remaining $200,000 goes to the retirement and transportation funds for Flathead Valley Community College and the county’s elementary and high schools.

“For the schools, it would be a very small amount of the overall budget, a little more than one-tenth of a percent,” Susanne O’Connor, the county school’s financial supervisor, said.

Also, local schools likely wouldn’t realize a real loss in revenue because, if needed, the lost dollars could be made up by a slight increase in local property taxes. The SRS funding would equal almost exactly the value of one additional mill; an increase of about $3 on a $100,000 property.

The portion that goes to the road fund, however, would be pure lost revenue, with few means to recover the loss other than voter approved levies. Impact fees or a county gas tax are options the county is exploring to boost road funds, but they likely wouldn’t cover the full loss.

“I’d say there’s a good chance the citizen roads committee could recommend commissioners put the levy question out there, and let people decide if they want to support it,” Pence said. “November would be the soonest possible election and the best option because we’d want to run it when a lot of voters would weigh in on it.”

Nationally, suggested options for piggybacking the act with other bills have all fallen through.

In a phone interview with reporters last week, U.S. Sen. Jon Tester, D-Mont., said he did not think funding for the SRS Act would make it into an economic stimulus package currently working its way through Congress. Rural Schools funding was stripped out of a recent energy bill and adding it to the Farm Bill is not a valid vehicle for the funding either, Tester said, considering President Bush has promised to veto the legislation. But Tester said he remained optimistic the funding could be secured.

“There are going to be plenty of vehicles that are going to come down the line,” Tester said. “We’ll find a place to put it in. This isn’t about fiscal conservatism, this is about doing the right thing for forested counties and schools.”

Blattie wasn’t as optimistic, saying he’s been told the program’s best hope is a war supplemental some time in late March or early April. It’s not time to panic, he said, but counties need to start looking at ways to cut their budget sooner rather than later.

“This isn’t simply a county budget issue; it’s something that will affect the overall economy of the entire state, especially in the counties that are hit the hardest,” he said. “It will affect what the county spends in the community and possibly staffing. It will have an effect on Main Street.”