Schweitzer defends new state budget

Gov. Brian Schweitzer defended the recently passed state budget Friday in Kalispell.

The state's spending plan is sustainable and the tax relief package was significant, said Schweitzer, who was in Kalispell to speak at the Montana Logging Association's annual meeting.

Schweitzer said in an interview at the Inter Lake that the 22 percent increase in spending authorized by the Legislature for the next biennium is misleading, because it is a figure that includes one-time spending as well as a considerable ending fund balance of $175 million.

The increase in ongoing general fund expenditures will amount 12 percent in 2008 and 4 percent in 2009.

"What I was scared of more than anything was big increases in ongoing spending," he said, noting that he ended up vetoing bills that would have collectively increased spending by $20 million.

Schweitzer also noted that for the first time in 50 years, the state will not be borrowing or bonding for capital improvement projects. Those projects were paid for up front with one-time appropriations.

On taxation, Schweitzer contends there was a grand total of $258 million in "tax cuts." But Republicans routinely dispute some of the elements that Schweitzer considers to be "tax cuts."

A total of $77 million was allocated to public employee retirement programs that the state of Montana was obligated to provide.

Schweitzer maintains that money counts as a tax cut, because if it weren't provided now, it would eventually be collected in taxes.

"You can't overestimate how big that is," he said of the retirement program infusion.

His tax package includes the repeal of a fee for water rights adjudication, an adoption tax credit, unemployment and a short-term emergency lodging credit.

Throughout the session, Republicans were insisting on more expansive property tax relief than the $400 per household rebate proposed by Schweitzer, which ended up being the centerpiece of property tax relief.

While there were no tax rate reductions that Republicans were seeking, Schweitzer has long maintained that there is nothing "permanent" about those kinds of tax cuts because future legislatures can pass increases. And across-the-board tax rate reductions will go to out-of-state property owners who aren't certain to spend the benefits in Montana.

Schweitzer said per household property tax rebates are far more likely to be spent on Main Street, Montana, and they aren't necessarily one-time only.

"If the money keeps coming in, there will be a second time and a third time" for rebates, he said.

Montana's economy has been growing on a hot streak, Schweitzer said, with the lowest unemployment rate of any state in the nation and growing per capita income.

But there's no certainty about how long the state's economic vibrancy will continue, and that's why having a $175 million balance will be important if actual revenue over the next two years comes up short of the projected $1.3 billion surplus.

If those projections come up short by less than 2 percentage points, Schweitzer said half of that $175 million will evaporate.

Schweitzer said one of his biggest disappointments from the session was the Legislature's failure to pass a business equipment tax reduction. Schweitzer said his initial proposal called for raising an exemption on business equipment from the current $20,000 to $150,000 worth of equipment.

That would have essentially precluded thousands of Montana businesses from paying any business equipment tax, Schweitzer said.

But at the end of the special session, all that was on the table was an exemption increase to $80,000. And that was killed in a Democrat controlled Senate Taxation Committee.

Lawmakers have offered various reasons for the bill dying. Some have said that the projected surplus had already been appropriated to other uses, while some have said that the bill did not include tax policy provisions that would have applied to business equipment taxes paid by out-of-state corporations and business owners.

Reporter Jim Mann may be reached at 758-4407 or by e-mail at jmann@dailyinterlake.com