Has the state budget grown too fast?

HELENA — As the state heads into the 2021 legislative session, Montana Republicans are hoping to capitalize on their newfound control of the governor’s office to advance a number of conservative priorities. Toward the top of many Republicans’ wish lists: reining in what they consider out-of-control state spending.

The GOP-controlled Legislature has long had to negotiate budgets with Democratic governors, who have typically been enthusiastic about spending taxpayer dollars on efforts to improve the state. The coming winter, however, will give the party’s fiscal hawks an opportunity to forge a budget with a fellow Republican, Gov.-elect Greg Gianforte, who campaigned on fiscal restraint and has promised that his administration will reduce the burden state taxes place on businesses and individual Montanans.

The state budget proposal announced Nov. 16 by outgoing Gov. Steve Bullock, a Democrat, calls for modest investments in education, health services and infrastructure, as well as maintenance of funding for the state’s expanded Medicaid program. It isn’t yet clear which, if any, of those items Gianforte will include in his version of the budget proposal, which is due Jan. 7.

Furthermore, on the legislative side, disputes over budget posture seem to be a major factor in pre-session infighting within the GOP caucus, with some Republican hardliners arguing that likely House Appropriations Committee Chair Llew Jones, R-Conrad, hasn’t done enough to limit spending during budget negotiations in previous sessions.

Rep. Brad Tschida, a Republican from Missoula who has also served on the House Appropriations Committee, said this week he thinks less ideologically committed conservatives have given Democrats too much allowance for extra spending during negotiations in past sessions. He’s been disappointed, he said, that Republican moderates have tended to strike budget deals with Democrats instead of sticking with the party’s right flank.

“The people who are constitutional conservatives have been left out of that conversation,” he said.

Jones, who has been a central figure in state budget negotiations for most of the last decade, has prepared a chart-filled PowerPoint presentation to argue that he and fellow members of the GOP “Solutions Caucus” have in fact effectively kept the state budget in check while negotiating with Democratic governors. Titled “Actual Growth in Government from real analysis,” it compiles figures from nonpartisan analysts at the Legislative Fiscal Division to argue that state spending has been held to a reasonable growth rate.

“While politicians pandering for votes like to wax eloquent about the explosive growth in state government spending driving taxes, the growth in state government has primarily followed inflation plus population,” reads an annotation on one slide.

Jones isn’t necessarily on the same page with everyone in his party.

Both on the campaign trail and since his election, Gianforte has claimed state spending grew dramatically over the last decade, implying that Democratic control of the executive branch has left state government with ample fat for cutting.

“With state spending increasing by 60% over the last 10 years, Governor-elect Gianforte thinks it’s critical to hold the line on new state spending,” Gianforte Press Secretary Brooke Stroyke said in an email last month, the primary comment the incoming governor’s office offered on Bullock’s budget proposal.

That 60% statistic, however, appears to overstate how much state government has grown.

Asked by Montana Free Press this month for a citation supporting that figure, Stroyke quoted figures from two separate documents — a University of Montana report on the 2009 Legislature that put the state budget for that session at $7.95 billion, and LFD’s report on the 2018-19 biennium budget, which reported a $13.18 billion budget total. Translated to a percentage change, that would indicate 66% spending growth across the decade.

But those numbers don’t apparently represent a true apples-to-apples comparison. The 2019 figure includes about $2 billion in statutory appropriations, spending written into state law so it doesn’t have to be reauthorized in the budget bill the Legislature crafts each session. The source for the numbers in the 2009 report, though, LFD’s biennium report for 2008-09, indicates that the $7.95 billion figure excludes more than $1 billion in statutory appropriations for that earlier biennium — meaning the calculation that produces the 66% figure is inflated, akin to weighing an apple against an apple with an orange slice stacked on top of it. 

Presented with that analysis this week, Stroyke noted in an email that the $7.95 billion figure had been reported by multiple secondary sources as the session’s total budget figure, but didn’t otherwise defend the comparison.

The state budget has grown over the past decade, but at a slower rate than the Gianforte statistic indicates. Legislative Fiscal Division data tabulating actual spending recorded in the state’s accounting system shows spending growing from $9.97 billion in the 2009 biennium to $13.27 billion in the 2019 biennium, a 33% increase.

Even those precise figures leave room for interpretation, however.

For starters, while absolute dollars represent the most straightforward way to look at budget growth, it’s arguably more accurate to adjust numbers for inflation, which accounts for the declining real value of the dollar over time.

The federal Consumer Price Index, for example, indicates that a state agency purchasing office supplies or giving employees cost-of-living raises would have to spend $1.18 in 2019 for every $1 it spent in 2009. Similarly, inflation means that each dollar a taxpayer sends the government in 2019 has slightly less real value than each tax dollar paid in 2009.

Montana also had about 85,000 more residents in 2019 than it did in 2009, an 8.6% increase. That means more taxpayers to share the cost of running state government, and also more people for state agencies to serve.

Jones argues that the fairest benchmark for measuring budget growth is population growth and inflation combined. That measure grew 28% over the decade ending in 2019 — slightly less than the 33% budget growth figure from the LFD data.

Jones also points out that the state budget has grown more slowly than another defensible benchmark: the size of the state economy as measured by average personal income. According to federal data cited by legislative analysts, average personal income in Montana grew by 51% to slightly more than $51,000 per capita between 2009 and 2019, indicating that the state budget has been growing more slowly than the overall state economy

Even with Republicans on different pages about how fast state spending has grown over the past decade, they present a united front on one point: With unified GOP control of the statehouse, and given uncertainty over how the economic impact of COVID-19 will affect state tax collections, this coming session will be a season for fiscal restraint.

“We’re going to have to hold the line on spending, because our tax income is going to be variable,” Jones said. “There are going to have to be some painful decisions that have to be made.”

Eric Dietrich is a journalist and data designer and the founder of the Long Streets economic reporting project. Contact Eric at edietrich@montanafreepress.org, 406-465-3386 ext. 2.