Legislators sound off on special session

For the 33rd time since statehood, Montana lawmakers could soon meet outside regular session to address the state’s budget crisis.

Revenues have fallen $227 million below the projections lawmakers used to craft the state’s 2017-19 budget. To compensate, Gov. Steve Bullock has proposed steep budget cuts to most state agencies, a prospect that’s alarmed Montanans active in the health-care, educational and environmental sectors, among others.

To resolve these concerns, the governor’s office is seeking a deal with state lawmakers. Press Secretary Marissa Perry told the Daily Inter Lake that Bullock’s office aims to secure about $75 million each in temporary tax increases, transfers from various state accounts into the general fund, and not-yet-specified budget cuts.

State law gives the governor authority to call a special session. Budget Director Dan Villa said he hopes one will take up this proposal before Thanksgiving, but the Legislature’s Republican leaders don’t share his forecast.

“To say we’re close to a deal is grossly overstating where we are,” House Speaker Austin Knudsen, R-Culbertson, told reporters in a phone call Friday. Calling on Bullock to specify the cuts he’s willing to make, Knudsen dismissed talk of a special session as “premature.”

Discussing the challenge of reaching a consensus, Rep. Dave Fern, D-Whitefish, told the Daily Inter Lake that “the diversity of the state is clear when you see the representatives and senators and what their priorities are.”

His observation rings true even within the Flathead Valley, where lawmakers differ over the crisis’s causes and solutions.

While area Democrats blame an outdated tax system for the crisis, Republicans fault a bloated state government. Democrats take the governor’s proposed cuts seriously; GOP lawmakers say they can cause little pain if properly applied, and support few, if any, efforts to raise revenue.

“You put the little pieces of the last six years together, and it absolutely points to terrible mismanagement of state government finances and employment,” Sen. Bob Keenan, R-Bigfork, told the Daily Inter Lake.

Keenan was quick to distance himself from this mismanagement. Having served in the Legislature on and off since 1995, he said he’s seen a “propensity to over-inflate the revenue projections,” one that led lawmakers to craft the 2017-2019 biennium budget according to expectations that fell short.

“I saw how the budget was put together,” he said, “I voted against it.”

As the budget gap has widened, Keenan says that, “from the citizens on the street, I don’t hear much, but from the organizations and associations [involved with areas facing cuts], they have reached out to their clients and members to put the pressure on us to raise taxes and have a special session, neither of which I’m excited about.”

He views the dire cuts under consideration as “the Washington Monument scheme,” in which agencies wrap nooses around their most important, high-profile activities to scare lawmakers into reversing cuts.

“It’s unconscionable, it’s devious,” he argues, “for these directors to propose cuts to services to people that rely on these services to live their lives, and not cut any of the bureaucracy and wages in state government.”

Fern, the Whitefish Democrat, doesn’t share that view.

“The word coming from the governor’s office is that it’s difficult to have more extensive cuts that don’t touch the most vulnerable.”

The 10-percent cuts now under review, he points out, were set forth by state agencies’ directors.

“I’m going to assume...that directors know much more than me as a legislator” about where cuts could be least painful.

If a session’s called, Fern sees the state’s firefighting costs as “something we can all agree on...It’s a very good starting point, and it could possibly lead to some backfilling of revenue.”

Echoing Bullock’s proposal, he suggested transferring money from some accounts into the general fund, and increasing some taxes and fees for two years. But getting there, he ventured, would require both parties’ leaders to determine what their senators and representatives were comfortable cutting and taxing.

Some Republicans are eying new revenue sources. In a recent interview with the Daily Inter Lake, Sen. Llew Jones, R-Conrad, floated a two-year lodging and rental car tax increase to refill the fire fund.

A “menu” of potential tax increases shared by the governor’s office includes those proposals, as well as raising other targeted taxes, like those on alcohol, tobacco and gambling.

But even temporary increases could draw opposition from Rep. Mike Cuffe’s constituents. The Eureka Republican says that, while he was shopping recently, “I think five people came by.” Their advice: “Don’t raise taxes, let them cut up at the top.’”

“I think there is a lot of reluctance to go back to Helena with any intention to raise taxes.”

Rep. Derek Skees, R-Kalispell, seems to share that reluctance.

“If we’re forced to come back, I’d like to make it very painful for the governor and his staff,” he told the Daily Inter Lake. “I will not vote for any tax, any fee increases, nothing. I am only going to vote for a reduction of government.”

“The struggle behind the scenes,” he continued, “is to convince all our fellow legislators that the governor has a statutory requirement to do his job.”

To pay the state’s $75 million firefighting bill while avoiding tax increases, he proposes transferring money from other state funds. In his view, the governor’s office has proven itself “good at robbing Peter to pay Paul, and they can easily do that for the fire fund.”

The governor’s office has identified $95 million in possible transfers, meaning closing the rest of the gap without new revenues would require cuts.

Whatever deal lawmakers eventually reach, Keenan isn’t hopeful the experience will guide the state to better fiscal management.

“In the day and age of term limits,” Keenan says, “I don’t think it will change, because there isn’t the institutional knowledge” of past budget crises.

Both parties’ lawmakers see more difficult choices ahead, albeit from different sources. Skees predicts that the Trump Administration’s proposed tax reform, if enacted, will require major changes to Montana’s tax code before the next general session.

Fern, meanwhile, suspects the state isn’t capturing enough revenue from key sectors of its economy, like tourism and e-commerce, and should adjust its tax system accordingly.

“I think a bigger conversation is ahead of us in the next session,” he says.

Reporter Patrick Reilly can be reached at preilly@dailyinterlake.com, or at 758-4407.