Late this afternoon, state agencies turned in plans to Governor Steve Bullock, outlining potential 10 percent budget cuts he requested to offset lower than expected state revenues.
Montana Public Radio’s Capitol reporter Corin Cates-Carney joins from Helena to talk us through it.
Josh Burnham: Corin, it seems like we’ve never fully left behind the budget issues the state was in when it entered the last legislative session. Can you explain what’s going on now?
Corin Cates-Carney: Sure. So last month the Governor’s Budget Director Dan Villa sent a memo to the heads of state agencies letting them know that the revenue projections assumed in the state budget were much lower than expected.
JB: How much lower?
CCC: The latest projections show the state missing it’s income projection by more than $200 million. And while that $200 million represents just a few percentage points off from the actual revenue coming in, it’s going to mean some serious cuts. The governor has the authority to ask departments across the state to offer up 10 percent cuts to help balance the state’s budget. And this point the largest agencies are likely to be the hardest hit - that means health department, corrections and public education, especially the state’s university system.
JB: What caused revenues to come in so short?
CCC: Well, when the governor’s office called reporters in to explain the situation, the budget director first and foremost blamed the Republican controlled Legislature. The governor’s office says the Legislature built a budget that was fundamentally flawed. The Democratic administration says lawmakers used an unrealistic projection to measure how much money the state would bring in in revenue during this 3-year budgeting cycle. The administration says if lawmakers would have agreed to governor Steve Bullock’s budget proposal, agreeing to bring in more money into the state through a series of tax increases, much of the current budgeting problems could have been avoided.
JB: But the governor did approve the budget passed by the Legislature right? He signed it into law?
CCC: He did. And the governor’s staff says that even though they didn’t like the budget, Governor Bullock had to sign it to avoid a government shutdown. For that to happen the Legislature and Executive branch would have remained in a stalemate for months after the scheduled 90 day session.
JB: What are some of the other reasons you’re hearing as to why we’re in this budget crisis?
CCC: Wildfire this year is really draining state resources, some are saying it might be the most expense fire season the state’s ever seen. At last count state has currently spent more than $57 million on fire fighting this year. And while the federal government might step in and help out with more of that funding, it’s unclear when or if that will happen.
Also, legislative fiscal analysts and lawmakers on both side of the aisle say some people could be holding back from paying corporate and investment taxes hoping for a more friendly tax environment in the near future once lawmakers in congress take up tax reform.
Republicans I’ve spoken with say people holding back on their capital gains is due to the election of Donald Trump. They’re banking on Trump’s promise to lower taxes. Republicans, like Democrats, also cite the fire season, and drought as a major factor for the budget issues the state is having.
JB: What can you tell us about the proposed cuts agencies submitted to the governor today?
CCC: These cuts are percentage based, so the departments that receive the largest amount of state general fund money will be hit the hardest.
The state’s health department is being asked to trim about a $105 million, over the next two years, including funding senior and long term care and child protection services.
For the higher education system. They’re expecting about a $22 million per year reduction. $17 million of that could come directly from campuses, which could results in a tuition hike.
The Corrections Department is another one of those big draws on state money. The Associated Press reported today that corrections is looking at taking about a $40 million cut over the next two years.
JB: These aren’t the first cuts since the end of the legislative session. Lawmakers passed a law creating triggers for automatic cuts in state spending if revenues fell, right?
CCC: That’s right. Those cuts were made in August, mainly targeting some of the larger pools of money in state government - the firefighting fund, the health department and public education.
JB: So these latest 10 percent reductions are on top of those cuts?
CCC: Yeah. The cuts that happened last month were meant to be more gradual than they actually were. The law was meant as to be a budget stabilization plan, preventing the state from a larger budget deficit. It was designed to make 4 levels of cuts each corresponding to how much actual revenue fell below projections. But when revenues actually did come in, they were so far off projections that all 4 levels were triggered cutting about $97 million from the budget.
With the new 10 percent cuts the governor is asking for now, more than $230 million could be reduced from state spending over the next two years.
JB: So when will these cuts actually happen? What happens next?
CCC: There is no clear deadline for when the cuts will happen. But it won’t be until after several public meeting between the the governor’s office and lawmakers.
Next week the governor’s budget director will brief a legislative committee about the latest revenue projections - letting them know how much the state is bringing in, and how much agencies need to trim in order to meet the state requirement of a balanced budget, with a little bit of a cushion.
Then a little over a week later the legislative finance committee will meet and discuss the budget plans submitted to the governor, and make their own recommendations on how the state makes the cuts. The governor’s office will announce the cuts some time after that.
JB: With these levels of cuts, is there any talk of a special legislative session?
CCC: The governor can make up to 10 percent cuts to the state budget without legislative approval. But lawmakers would need to be called in for anything more than that. Lawmakers would also have to be called in if the state was going to try and bring more money into the state by implementing new taxes.
So far, it seems like both the governor’s office and lawmakers would like to avoid calling a special session.