Opening Moves

By Bob Decker
December 3, 2008

Montana’s legislators don’t clock in for the upcoming session until January 5, 2009, but there’s no shortage of ongoing political activity to augur the issues and tone of the sixty-first Montana Legislature.

The subject of money invariably occupies center court, so the upheaval of the global economy now underway makes the question of how Montana’s state government taxes and spends even more compelling than usual. The meeting of the legislative Revenue and Transportation Interim Committee on November 17-18 in many ways mirrored the current economic chaos.

The main event for the Revenue and Transportation Interim Committee (RTIC), comprised of six House members and six Senate members and split evenly between Republicans and Democrats, was to adopt, if possible, a comprehensive revenue estimate for the 2010-2011 biennium and forward it to the 2009 Legislature. Montana law mandates that the Legislature estimate revenue, and the adopted figure serves as a foundational reference during the session for decisions about taxing and spending.

RTIC received a detailed revenue estimate from its staff, the Legislative Fiscal Division, and it heard another one from Governor Brian Schweitzer’s budget office. Montana’s governor is obliged by statute to produce a state budget proposal before the start of a new legislative session, and Schweitzer had announced his budget on November 15.

The revenue estimates of the legislative staff and the governor’s office differed by a mere $1 million (out of a three-year, 2009-2011 total revenue estimate of $5.7 billion), but significant differences existed in the offices’ respective estimates for the major elements of revenue , especially personal income tax and corporate income tax. (Another major contributor to state revenues, property taxation, received less attention because all players – the governor and both political parties – appear to agree that property tax revenue should remain at current levels, even as an unfolding reappraisal process by the Department of Revenue reveals that property values throughout much of Montana have increased substantially during the past six years.)

Here’s where partisan interests kicked in. Republicans on the committee wanted the revenue estimate to be as low as possible; Democrats wanted to accept the numbers of the legislative staff and resisted attempts by Republicans to pick the lower of category-specific estimates provided by the legislative staff and governor’s office.

Why the different reactions? Republicans said that estimates for state revenue from corporate and personal income taxation were too optimistic and didn’t reflect the depth or probable duration of the economic downturn now underway. They attempted – through motions that failed on tie, party-line votes – to adopt the lower of the two estimates before them.

Rep. Bob Lake (R-Hamilton) said he wanted from the adopted revenue estimate a “worst-case scenario” and “a pessimistic view of revenue.” RTIC Chair Sen. Jim Peterson (R-Buffalo) supported Lake’s outlook, as did Sen. Robert Story (R-Park City), who offered the motions to adopt lower estimates. Democrats, led by Senators Christine Kaufmann (D-Helena) and Jim Elliot (D-Trout Creek), said that the committee’s staff of professionals had invested significant time and effort into their estimates, that mixing estimates from multiple sources (and thus the methodologies that produced them) would make future adjustments difficult, and that any revenue estimate adopted by the committee could be revised during the course of the legislative session.

While the argument presented for either argument had some degree of appeal, it’s clear that other, more fundamental motivations went unmentioned. Republicans want the lowest possible revenue estimate as a lever against increased government spending that could be proposed by a Democrat-leaning House and perhaps accepted by a Democratic governor. The party split in the House is 50-50, but the Speaker is a Democrat, as will likely be the chairs of the most influential House committees on matters of money.

Democrats are looking at a deadlock scenario in the House, a Republican majority in the Senate, and a governor who is projecting austerity and has pledged to reject any new taxes. They have few levers for advancing proposals for new projects or the funds to support them, and they don’t want a pruned revenue estimate as a cornerstone reference in legislative dialog about finance.

In the end, the Republican motions to cherry-pick category-specific revenue estimates failed on tie votes, and the committee eventually adopted the package offered by the legislative staff. The estimate now advances to the 2009 legislative session, where it can be adjusted – according to theory - to reflect the most up-to-date information on unfolding economic events.