Dip in State Revenue Prompts Concern Among Montana Officials

HELENA — Revenue flowing into Montana’s coffers has slowed during the past three months, prompting concern from the Capitol to city halls across the state.

Montana’s general fund is nearly 4 percent behind projections, with oil and gas tax receipts down by more than half. The slowdown amounts to more than $67 million the government had counted on. What’s more, fluctuating prices at gas pumps are translating to budgetary uncertainty.

State Budget Director Dan Villa said he wasn’t overly alarmed by the shortfalls. Enough money remains in reserves to cover fluctuations in revenue, he said.

“If we have a shortfall, we manage to it. That’s what we do,” Villa said.

Still, a hiring freeze is in place at the Department of Transportation, which relies heavily on the state gas tax to fund operations. Because of a $25 million revenue shortfall, the department may also delay a slew of road projects.

The transportation agency collects fuel taxes for public highways, streets and bridges. Some of that money also goes to local governments, as well as the Department of Justice.

Montana’s revenue declines don’t begin to approach the woes in some of its neighboring states, Villa said.

Once flush with oil and gas money, some states are reeling from falling production and prices. Wyoming officials are grappling with plummeting revenues. Gov. Matt Mead has directed state agencies to slash budgets by 8 percent. Mead hasn’t ruled out cutting state jobs as part of a $300 million reduction over the next two years.

In Montana, revenue declines mean greater scrutiny over expenses and could intensify budget debates during next year’s legislative session.

Whether the state’s three straight declines in general fund revenues are a trend or a temporary blip may not be known until the next fiscal year, which begins in July, as final revenue tallies come in.

The Department of Justice is keeping an eye on gas-tax revenues, agency spokesman John Barnes said. The Montana Highway Patrol relies on the gas tax for about three-fourths of its nearly $40 million budget. Any prolonged dips could influence budget requests when the Legislature reconvenes next year, he said.

“When you’re talking about even the possibility of reductions in that revenue stream, you’re talking about troopers and vehicles. So we’re paying very close attention to that and having conversations with the state budget office,” Barnes said. “At this point, we don’t have any reason to believe that operations in the current biennium would be impacted.”

The state budget, which is drafted every two years, assumed gas-tax revenues of $137 million and $73 million in diesel taxes for the current fiscal year.

Lower revenues are already affecting some counties, said Harold Blattie, the executive director of the Montana Association of Counties. Hi-Line counties are being particularly hit by a decline in revenues from natural gas, he said.

“The revenue loss is real,” he said. “They have learned to live with what they have.”

Tim Burton, a former chief of staff for Gov. Steve Bullock and now the director of the Montana League of Cities and Towns, said his members are struggling with the drop off in revenues from oil, gas and coal. “That’s a concerning trend. No doubt about it,” Burton said. “We’re certainly monitoring the situation leading up to the next legislative session in January.”