Legislators expect state surplus to keep shrinking

Montana state governments official $287 million projected surplus could easily continue to shrink and likely will require frequent adjustments as the upcoming legislative session progresses, two Flathead lawmakers said last week.

Rep. Jon Sonju, R-Kalispell, and Rep. Mike Jopek, D-Whitefish, sit on the Interim Revenue and Transportation Committee that reviewed and revised the states revenue outlook in Helena.

In less than two months, the revenue forecast shriveled by $500 million to $287 million due to the crumbling economy and tumbling expectations for oil and gas tax revenue.

I think it was a bit shocking to folks, said Jopek, referring to the six Republicans and six Democrats who sit on the committee.

The committee approved of the $287 million as a benchmark to begin planning on the state budget for the next two years. Although the revenue estimate is based on the best current information, Sonju said he wanted the figure lowered to account for the likelihood of continuing economic troubles.

I think the state budget office and the fiscal division are reputable and I think they know what they are doing, Sonju said. I would rather be on the side of caution … the last thing I want to do is go back into a special session to consider possible budget cuts.

Sonju said he is mostly concerned about how precipitously the revenue forecast dropped.

I think thats a clear indicator that this economy is not stable and there is a likelihood that revenues will be lower than the current forecast, he said.

Jopek also believes that the outlook is not good and the Legislatures tax committees will require timely adjustments to the revenue forecast.

Its a number well look at again in January and in February and in March, he said. We have to have a balanced budget so there will be revisions and they will be based on the best estimates that are out there.

Jopek noted that the interim committee did deflate the revenue forecast by about $17 million to reflect that statewide property reappraisals will not result in additional tax collections.

The Department of Revenue reported to the committee that the average values of residential property in Montana increased 40 to 50 percent during the last six years. However, there is a full expectation in Gov. Brian Schweitzers administration and among legislators that there will be mitigation measures to ensure the increased appraisal values do result in higher property tax collections.

Overall, there will be no property tax increases on average due to the changes in property values since Jan. 1, 2002, Dan Bucks, the state revenue director, flatly told the committee.

Sonju said the Department of Revenue will generate model legislation for the interim committee to consider when it meets again on Dec. 8.

Jopek added that legislators will have a variety of methods, ranging from property exemptions to property tax rate reductions, to consider for preventing a sudden inflation in property taxes.

There will be a freeze. There will be no new collections for the state, he said.

The Department of Revenues reappraisal numbers are considered preliminary, but the results indicate that residential and commercial property increased by an average of about 6 percent a year since 2002. The sharpest increases were in resort counties, including Flathead County.

According to Jeff Martin, the lead staffer for the interim committee, the reappraisal numbers that are available for Flathead County are based on a cost formula, finding that residential values increased by 66 percent and commercial properties increased by 40 percent over the six-year period.

Appraisals based on a productivity formula found that the countys agricultural property values increased by 55 percent and forest lands increased by 46 percent.

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