The money was there all along
12/6/11 - It's official: state revenues are even higher than the 2011 Legislature's predictions -- just as MEA-MFT and the governor's budget director said all along.
"The money was there all along to thaw state employee pay, to invest in k-12 and higher education, to build infrastructure and create good paying jobs, to avoid passing unavoidable costs down to local property tax payers and students," said MEA-MFT President Eric Feaver.
"Why would we send this gang of conniving, anti-government, anti-public employee, anti-public schools, anti-teacher miscreants back to the next legislature? So they can then just rebate the money . . . and forget investment in the things good government and schools do for all Montanans?"
Feaver continued, "Think an across-the-board increase in state employee pay might make for a better Christmas now than a maybe, perhaps, don't-hold-your-breath income tax rebate after a four-year pay freeze? And who will get that rebate anyway?"
Budget surplus projected at $427 million
By CHARLES S. JOHNSON IR State Bureau | Tuesday, December 6, 2011
The state’s general fund budget surplus by mid-2013 is now projected to be much larger than what the 2011 Legislature had estimated, the Legislature’s chief revenue forecaster said Monday.
Terry Johnson, a principal legislative fiscal analyst, told the Legislative Finance Committee he now is estimating the state treasury’s ending fund balance, or surplus, will be $426.7 million on June 30, 2013.
That’s $276.3 million more than the $150.4 million surplus estimated by the Legislature for mid-2013 before it adjourned late April this year and set the state’s two-year general fund budget of $3.7 billion.
Revenue estimates were one of the most contentious political issues during the 2011 Legislature.
Democratic Gov. Brian Schweitzer and leaders of the Democratic minorities in the House and Senate insisted the legislative revenue estimates were far too low and failed to reflect an improving Montana economy. Leaders of the Republican House and Senate majorities, however, said they wanted to be cautious because they feared that the state might experience a “double-dip” recession.
The Schweitzer administration declined comment Monday on Johnson’s revised estimates, but the governor has said a number of times earlier this year that his estimates were right and the Legislature’s wrong.
Legislative revenue estimates in effect dictate state spending levels because the Montana Constitution stipulates that general fund spending can’t exceed anticipated revenues or tax collections.
In response to lower revenue estimates, the Republican legislative majorities cut state general fund spending by 6 percent for the current two-year budget period that started July 1. Schweitzer had proposed reducing state spending by 5 percent. He maintained that some of the Republican spending reductions were unnecessary.
Johnson said Monday he was raising revenue estimates by $137.8 million based on projected higher tax collections.
Individual income tax collections led the way with a proposed $117.3 million higher adjustment over the next two years, followed by corporation license taxes at $31.9 million. Oil and gas production taxes are up $25.2 million. Vehicle fees and taxes are projected to drop by $15.6 million, while other taxes are forecast to decline $24.8 million. No change is expected in general fund revenue from property taxes.
Besides increased tax collections, other changes reported by Johnson that contributed to the higher revenue estimate included:
-- $76 million in extra money because of the stronger revenue growth for fiscal 2011, which ended June 30.
-- $38 million in reversions, or money not spent by state agencies in fiscal 2011.
-- $23.8 million in funds for the state school trust and legacy fund account from large sales of mineral rights on state lands. This in turns reduces the need for supplemental general fund appropriations for K-12 schools by that amount.
“It should be noted that as revenues exceed expectations, the structural imbalance (difference between ongoing revenues and ongoing expenditures) has been eliminated, thereby creating a more favorable 2015 biennium budget outlook for the 2013 Legislature,” Johnson said in his report.
Sen. Dave Wanzenried, D-Missoula, raised questions about the accuracy of revenue estimates, asking Johnson, “Are we getting better at this or not?”
Johnson said the $137 million understatement for higher tax collections amounts to 3.8 percent, which is below the historic error rate.
“We are dealing with some unusual activity, not just this biennium, but before the downturn,” he said. “There was exceptional growth from 2005 to 2008. We thought revenues would be far better than they turned out to be in 2010 and 2011.”
Johnson said he and legislative fiscal staff are starting to better understand “some of the nuances of the accounting data.”
Wanzenried asked, “How much confidence can we expect during the (2013) session? Should we expect a margin of error of plus or minus 3 to 5 percent?”
Johnson said the National Conference of State Legislatures has said an acceptable range for adequate ending fund balances is 5 percent of the total appropriations. That would be about $180 million for this biennium, he said later.
Sen. Dave Lewis, R-Helena, said the state will have about $200 million more in its surplus than the 5 percent level that NCSL recommends. The 2013 Legislature could spend that $200 million to shore up state pension funds and to construct new state buildings, he said.
Or, Lewis said, the Legislature could approve a 25 percent tax rebate to individual income taxpayers, he said.
“It is getting on to Christmas,” Lewis said.