Flathead Lawmakers Reflect on Whirlwind Special Session

GOP lawmakers avoid tax increases, dig deep into transfers to solve budget crisis

By Tristan Scott
The Montana State Capitol. Beacon File Photo

When the gavel fell for the final time early Thursday morning and the Montana Legislature adjourned its 32nd special session sine die, lawmakers concluded a dizzying two-day marathon of deal-making and political maneuvering in an effort to patch a $227 million budget hole.

After enduring two long days of committee meetings and House and Senate sessions that dragged on late into the night, legislators went home Nov. 16 having cobbled together a mixed package of solutions that includes spending cuts, fund transfers and a new fee on the state workers’ compensation fund.

The Senate adjourned around 12:30 a.m. on Nov. 16, while the House followed suit shortly after 1 a.m.

GOP leaders had been working for weeks to craft a deal that leaned heavily on fund transfers — essentially, borrowing money from a variety of funds and adding them to the state general fund — while avoiding a bevy of tax increases proposed by Democratic Gov. Steve Bullock, an option many Republicans described as a nonstarter.

“Although we were only in session for two days we had been working on this for weeks,” Rep. Greg Hertz, R-Polson, the speaker pro tempore, said. “We had been working with legislative staff to identify what fund transfers would have the least consequences because the governor had an obsession with raising taxes. As Republicans we weren’t going to go there. House Republicans especially were very strong on that, and we held firm to the end.”

Bullock announced he was calling the special session on Nov. 6, ordering lawmakers back to Helena in a final effort to plug the holes in the budget. The need for the special session, the first in a decade, arose due to a devastating and expensive wildfire season and less-than-projected revenue streams

In making the announcement, Bullock pared back his earlier proposal to cut $227 million from the state’s general fund over the next biennium, which would deal the heaviest blow — 85 percent — on Montana’s most vulnerable populations served by three agencies: the Department of Public Health and Human Services, Department of Corrections and primary, secondary and higher education.

Instead, he recommended — and ultimately implemented — cutting $76.6 million in general fund spending, including $49 million to the Department of Health and Human Services, while temporarily raising some taxes to defray the costs of Montana’s fire season.

He also recommended delaying state contributions to the employee health plan and the judicial retirement system, which are running surpluses.

Bullock’s proposed tax increases included raising the state lodging tax and rental-car taxes to 10 percent, up from 7 percent and 4 percent, respectively, and imposing a $30 million fee on the state workers’ compensation fund’s $600 million investment portfolio.

While his proposed tax increases failed, the charge on the workers’ compensation fund passed the House after some Republicans changed their votes to support the measure.

“I fought pretty hard against that,” Hertz said of the workers’ compensation bill, which he called unconstitutional. “I just don’t feel it’s a fair fee. But sometimes you’ve got to take a little bit of bad with the good.”

Bullock expressed similar sentiments shortly after the session adjourned.

“Tonight we reached a reasonable and responsible compromise to balance our budget and pay for Montana’s record fire season,” according to a statement. “While I’m disappointed we were not able to reach a full agreement, I would be remiss not to acknowledge all the progress made to minimize the impacts of severe budget cuts on the most vulnerable among us.”

Rep. Dave Fern, D-Whitefish, said the whirlwind nature of the special session made for a chaotic two days, but he was impressed with the Legislature’s ability to maximize fund transfers, legislative cuts, delays, and other savings, a move that accounted for $94 million.

“They worked really hard to find transfers and that helped with a big gap,” Fern said. “I hope they were able to mitigate the consequences and found departments that can live without that money, but they certainly worked very hard.”

“It was pretty chaotic,” Fern added. “But ultimately I think we made things better.”

Most of the negotiations occurred between Republicans and the Democratic governor, with GOP members resorting to old-school politicking in some instances to force Bullock’s hand.

The most prominent instance of that was evidenced in Republican lawmakers crafting legislation that forced Bullock to extend the contract for CoreCivic, a company that manages a private prison in Shelby, and offered Bullock access to a $30 million escrow account in exchange for a 10-year extension of its contract to run the facility.

Democrats including the governor rejected the contract extension, saying it was not prudent to extend a contract without more information about the prison’s effectiveness.

Rep. Frank Garner, R-Kalispell, the former chief of police here, said while lawmakers always benefit from being better informed about an issue, the money helped offset deeper cuts to essential services.

“I think a really rapidly crafted solution clearly makes no one completely happy, but it went a long way to mitigating cuts to essential services,” Garner said.

“When I look at the prison, particularly with my background, I see a facility that has been in operation for 20 years and that has successfully managed a population, certainly not without some issues, but has successfully managed a population and has done so at least financially more responsibly than we have sometimes been able to do at the state level. And then you have a reserve of money at a time when we needed it. So I think it was an important tool to give to the governor.”

Bullock said the final resolution helps ensure that most seniors will be able to access prescription drugs, allows children with autism to receive services, and prevents substantial tuition increases.

“We’ve prevented many job losses. We’ve protected public safety and prevented strains on local sheriffs’ offices. We’ve prevented financial duress on rural hospitals,” Bullock stated early Thursday. “These aren’t just numbers on a balance sheet, these are real people. These are our friends, our families and our neighbors — our children, our grandchildren, our parents and grandparents. While we still have work to do, tonight Montanans can be pleased.”

Here’s what emerged from the Special Session:

$75 million in Bullock’s budget cuts.

$94 million in budget transfers, legislative cuts, delays and other savings.

$30 million from a temporary, new fee charged to the workers’ compensation Montana State Fund, which has the Board of Investments invest the money, for assets above $1 billion. That bill, originally rejected in the House, was revived and passed before adjournment.

$32 million to renew the private prison contract.