Montana Revenue Shortfall Triggers Worst-case Budget Cuts

Schools and health programs will receive the brunt of the cuts

By BOBBY CAINA CALVAN, Associated Press
The state Capitol rotunda. Beacon File Photo

HELENA — Montana revenues have fallen far enough below projections to trigger a worst-case scenario — $97 million in spending cuts across state government starting as soon as next month, Gov. Steve Bullock’s budget director said Tuesday.

Schools and health programs will receive the brunt of the cuts. The Office of Public Instruction that oversees public schools will lose at least $19 million over two years, while the Department of Public Health and Human Services will have to cut at least $26 million, the governor’s budget office said. Both figures are significantly higher than estimates provided earlier by the legislative fiscal office.

In addition, $30 million will be transferred out of the state’s reserve fund used to pay the cost of fighting wildfires, with more fires burning in Montana than in any other U.S. state. At least $30 million will remain in the fund, which state officials project should be enough to cover firefighting costs.

The Republican-led Montana Legislature passed a budget earlier this year based on revenue coming in at $2.2 billion. Democratic lawmakers and Bullock’s budget director, Dan Villa, warned that revenue estimate was overly optimistic compared to the governor’s projections.

“We cannot have revenue estimates artificially inflated to avoid hard decisions,” Villa told reporters, a reference to lawmakers’ rejecting tax increases the governor proposed to raise revenue.

However, Bullock signed into law the two-year budget and the separate bill that set the revenue triggers for the cuts.

There are four tiers of spending cuts, depending on the amount of money the state takes in compared to the revenue forecast. The actual shortfall was $75 million, Villa said, but all of the cuts would have been triggered anyway if revenue had fallen $36 million short of the forecast. He partly blamed lower-than-expected corporation tax revenues for the deeper shortfall.

Villa sent a memo to agency directors Tuesday ordering them to begin implementing the reductions. He told reporters that Bullock’s priority now is to minimize the harm to state workers and residents. At least 16 employees will lose their jobs, he said, including eight from the Montana Historical Society, seven from the State Library and one from the Department of Agriculture. The library and the historical society will each lose $1.3 million.

The governor had sought a package of revenue measures, including a new tax rate on the wealthiest, but Republican legislators killed most of those proposals.

“We have to live within our means,” said Rep. Nancy Balance, a Republican from Hamilton who chairs the House Appropriations Committee. “The governor instead wanted to raise taxes, but Republicans preferred him to cut spending.”

The cuts eliminate funding for state employee raises, which means agencies will have to use existing money to pay for the raises. Payments will also be cut for privately contracted direct care workers for the elderly and disabled, and some aid to public schools will be slashed.

Most state agencies will have to reduce their budgets by a half-percentage point, with others requiring deeper cuts. Cuts are also planned for promoting tourism and agriculture in Montana, and the state’s contract with Blue Cross and Blue Shield of Montana to run its Medicaid expansion program will be terminated.

“Unfortunately, we’re in a predicament where the revenues aren’t coming through for Montanans,” said Senate Majority Leader Fred Thomas, a Stevensville Republican. As painful as the cuts might be, he said, “there is no second-guessing on our part. We did the right thing.”