Time to Tighten Government Purse Strings

In these tough times, the governor needs to be fiscally prudent and make the difficult decisions expected of a leader

By Llew Jones

Droughts. Firestorms. Crashed commodity prices. Coal-fired energy plants shutting down. Stores on Main Street closing. One doesn’t have to look far to see Montanan’s suffering. When the executive proposes tax increases (revenue enhancers) as a preferred solution for government’s current shortfalls, I find myself unconvinced that a tax hike is the right answer today. For me, tightening the government’s purse strings is the place to begin.

Yes, cutting spending is hard. Ask the cattleman whose calf crop is worth 50 percent, or the rancher whose hay burned, or the farmer faced with droughted crops that sell for low prices, or the Main Street businessman whose customers now have little money to spend, or the employee whose job was eliminated. These private sector Montanans have no choice but live within their means.

Because cuts impact government employees (good people hired to do a job) and the government services many rely upon, the easiest answer for government is always “tax someone” and get more money. If the resource economy were booming, asking Montanans to share a little more with schools, nursing homes, and prisons might be in order. However, today that “someone” facing a tax increase is likely a Montana business or individual already struggling to survive.

Montana law provides the governor with a reduction mechanism, where, if state revenues (taxpayer dollars) come in low, he can mandate government spending cuts. The executive has begun this process. I recognize this is challenging as state dollars are primarily spent on education, incarceration, and medication. Moreover, when facing cuts, these agencies are adept at pointing elsewhere and arguing that their section is already too lean. Nonetheless, it is the governor’s job to lead here.

Why is revenue unpredictable? Growing revenue volatility is the harsh reality in Montana as state government is dependent upon highly volatile income taxes (local government uses property taxes). A natural resource based state like Montana can expect income taxes to drop when commodity prices fall and/or there is drought. In addition, there has been a reduction of capital gains taxes collected (folks cashing out stocks, etc.) and a deferral of business income tax receipts as payers wait to see if the Trump tax package has legs. As these factors mitigate, it is likely that income tax receipts will improve. People in Montana save when times are good and tighten the purse strings when times are hard. Last session, I passed legislation to ensure that government had to play by these same rules, which helps with this volatility. But, as this mechanism is new, its worth can only be evaluated in a future crisis.

As to the political blame game, I too wish the revenue had come in higher and/or that the executive had reacted sooner to previous shortfalls thus preserving Montana’s $300 million reserve to mitigate today’s crisis. This is not the case. The reality: Today the governor has a choice. Times are tough. Will he tighten the purse strings or will he ask for more taxes?

From my perspective, the governor needs to do the job the law authorized and cut government expenditures to a level that reflects what Montanans can currently afford. He needs to work to propose cuts that impact services on the ground the least. He needs to select cuts that have the lowest impact possible on current government employees. In these tough times, he needs to be fiscally prudent and make the difficult decisions expected of a leader. While Montana has little choice other than step up and pay its share of the fire bill, I would hope that the smoke-filled air will prompt the passage of policy reforms supporting the wise harvest of timber, rather than the current political reality where lack of responsible harvest becomes the basis for unstoppable firestorms.

Currently, I pray for rain and hope for a bump in the price of commodities. I will not support permanent tax increases during these down times. I remain hopefully, as most Montana families do, that next year will be a better one for my district, for Montana, and for this nation.

Sen. Llew Jones, R-Conrad, is chairman of the Senate Finance and Claims Committee.

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