Montana Lawmakers Plan for Modest State Revenue Growth

The revenue estimate is used to set spending levels in the two-year state budget

By Associated Press

HELENA – Montana lawmakers will be counting on the state’s revenue growing modestly over the next three years when they write the next budget, according to a revenue estimate a legislative panel adopted Monday.

The Revenue and Transportation Interim Committee voted to accept the forecast created by the Legislative Fiscal Division that predicts state tax collections and interest earnings will increase from $2.4 billion this year to $2.6 billion in 2021.

The revenue estimate is used to set spending levels in the two-year state budget. The Montana Legislature meets every other year, meaning that a budget based on a revenue estimate that turns out to be wrong can lead the state into deficit spending.

That can result in a special session to cut spending, such as the one called in November 2017 after revenue collections dropped and Montana recorded its most expensive fire season in state history.

Legislative Fiscal Division head Amy Carlson said the latest estimate calls for modest growth in tax collections and interest earnings between 3 and 4.2 percent a year, compared to the state’s long-term 4.8 percent average annual growth rate.

The growth will mainly be driven by increases in individual income taxes, which are expected to make up more than 57 percent of the state’s revenue in 2021, compared to 41 percent in 2002.

“Individual income tax is continuing to grow with the economy, and the other sources of income are not necessarily growing with the economy,” Carlson said.

Democratic Gov. Steve Bullock’s office releases its own, competing estimate that as recently as 2015 differed from the fiscal division’s estimate by $358 million.

This year, however, the difference between the two forecasts is less than 1 percent, with Bullock’s estimate coming in $46 million lower than the Legislative Fiscal Division’s.

“I think are differences are primarily marginal at this time,” said Tom Livers, Bullock’s director of the Office of Budget and Program Planning.

One main difference is the approach each takes to changes in the federal tax policy. The governor’s office took a somewhat more conservative approach because of the uncertainty around how companies will respond to changes, such as the ability to claim 100 percent of depreciation on property bought after January in the first year.

The lawmakers on the committee adopted the governor’s conservative estimate on that so-called “bonus depreciation,” the only change they made to the Legislative Fiscal Division’s forecast.

Stay Connected with the Daily Roundup.

Sign up for our newsletter and get the best of the Beacon delivered every day to your inbox.