Montana Budget Looking at $426M Surplus

By Beacon Staff

HELENA — The state budget is projected to have a $426.7 million surplus by mid-2013, nearly three times the amount estimated by the 2011 Legislature before it adjourned in April, the Legislature’s chief revenue forecaster told lawmakers.

Terry Johnson told the Legislative Finance Committee on Monday that higher individual income tax collections led to the increased surplus estimate, Lee Newspapers of Montana reports.

Democrats, including Gov. Brian Schweitzer, had insisted during the legislative session that revenue estimates were too low and failed to reflect an improving state economy. Republican leaders, however, wanted to be cautious and cut state general fund spending by 6 percent anticipating a $150.4 million surplus. The state budget was set at $3.7 billion.

Schweitzer had recommended a 5 percent cut. The Schweitzer administration declined to comment Monday on Johnson’s updated estimates.

Legislative revenue estimates dictate state spending levels because the Montana Constitution stipulates that general fund spending can’t exceed anticipated revenue.

Johnson told lawmakers that individual income tax collections accounted for $117.3 million of the increased estimate, followed by corporate license taxes and $31.9 million and a $25.2 million increase in oil and gas production taxes. Vehicle fees and other taxes were expected to decrease by a total of $40.4 million.

Along with expected increased tax collections, the state received $76 million more revenue than expected for fiscal 2011, which ended in June and agencies reverted $38 million in unspent money to the general fund. Large sales of mineral rights generated $23.8 million in school funding, reducing the need for supplemental general fund appropriations for schools.

Johnson said it’s been difficult in recent years to estimate state revenue, but the error is still 3.8 percent, which is below the historical error rate.

“We are really dealing with some unusual activity, not just this biennium, but before the downturn,” Johnson said. “There was exceptional growth from 2005 to 2008. We thought revenues would be far better than they turned out to be in 2010 and 2011.”

Sen. Dave Lewis, R-Helena, noted the state will have $200 million more in its surplus than the 5 percent recommended by the National Conference of State Legislatures.

The 2013 Legislature could spend that money to shore up state pension funds and to build new state buildings or lawmakers could approve a tax rebate to individual income taxpayers.

A referendum on the 2012 ballot calls for tax credits if state revenue comes in higher than lawmakers expected. If passed, the referendum would require the state to give taxpayer credits for one-half of the revenue that exceeds 125 percent of the state’s projected general fund balance, if the excess amount is at least $5 million.