HELENA — Montana will face a $227 million budget shortfall within two years unless state government agencies cut their spending by another 10 percent, Gov. Steve Bullock’s budget director said Wednesday.
Bullock budget director Dan Villa sent state agencies a memo Wednesday directing them to submit plans that would cut state spending by at least $237 million over the next two years. The actual cuts won’t happen for at least a month, while the proposals are reviewed by state lawmakers and legislative fiscal analysts.
The state’s money problems are a direct result of the Republican-led Legislature approving a revenue forecast that was too high, and basing state spending around that forecast, Villa said. In addition, Montana has had a busy fire year that has wiped out one reserve fund and will soon extinguish an additional $16 million in emergency funding.
Villa said uncertainty about whether the federal tax laws will change under President Donald Trump also puts state revenue at risk.
The Bullock administration laid the blame squarely on the shoulders of Republican legislative leaders who rejected the governor’s proposed tax increases and then adopted an unrealistic revenue estimate during the legislative session.
“Montanans need to speak to their legislators,” Villa said. “If there is a wish to increase revenues, that is a conversation that must be had with those who voted against it last session.”
Senate Majority Leader Fred Thomas bristled at Villa’s comments. The Stevensville Republican said revenue projections are always difficult, but the governor should have trimmed spending earlier instead of painting a false economic picture to boost his re-election bid last year.
“When we advised the governor in 2016 that revenues seemed to be short and he should take steps to reduce spending, they didn’t do anything,” Thomas said. “From the past work by the governor’s office, they’ll need our input heavily to get through this.”
Lower-than-expected tax collections for the financial year that ended in June already triggered about $70 million in spending cuts across state government earlier this month. It also swept $30 million out of the state’s fund for wildfire costs, leaving that account with just $32 million — money that was extinguished earlier this month.
Those cuts weren’t enough to make up for the shortfall, Villa said. The state is now projected to have an $84 million deficit at the end of the two-year budget cycle in 2019, he said
Montana law requires the state to keep a certain amount of money in reserve. That amount for this cycle is $143 million, creating a $227 million gap that the state must close.
State agencies must submit their 10 percent reduction plans by Sept. 8. They will be reviewed by two legislative committees, but Bullock will get the final say on whether to impose the cuts and how much they should be.
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