Federal Tax Changes Leave Montana Budget Outlook in Doubt

Bullock administration says "strong possibility" the state will have to call another special session

By Associated Press
The Montana State Capitol in Helena. Beacon file photo

HELENA – There’s a “strong possibility” the state will have to call another special session of the Legislature to address a potential budget shortfall resulting from changes to federal tax laws, according to Montana’s revenue chief.

Without a special session, Department of Revenue Director Mike Kadas said the state could face a $46 million hole in its budget under an initial reading of the changes to the tax code approved by Congress last month.

That’s about 2 percent of Montana’s annual general fund budget.

Montana already cut around 4 percent of the two-year budget lawmakers passed in 2017.

If the state changes its interpretation of the tax code changes, it could result in the agency blocking deductions called for under the new law that might not apply to state taxes, Kadas said.

“See what happens is we’ll get sued,” Kadas told Montana Public Radio . “If we lose the suit we will owe millions of dollars in refunds to taxpayers.”

He said the state wants to be absolutely sure on the details of the new tax bill before moving forward.

Montana U.S. Sen. Steve Daines, a Republican who voted in favor of the tax law changes, said any state revenue losses should be addressed through budget cuts or other fiscal belt tightening. Daines added that he was confident the federal tax re-write would spark economic growth.

“I’ll tell you what, if you can’t find ways to cut 2-3-4 percent in different places — that’s something that Montana families have to do all the time,” he said.

In the lead-up to a November special session to address a projected $227 million deficit, Gov. Steve Bullock made $76.6 million in cuts to the state budget.

He later signed bills approved by the Legislature that suspended contributions to a judge’s retirement system and payments to a state employee health care plan for a combined $12.8 million in savings. Another measure charged a 3 percent fee on some Montana State Fund investments to raise nearly $30 million over two years.

Bullock also signed bills that would end some school block grants, transfer money to the state fire fund and allow the state to sell liquor licenses at auction.