Bullock's $9.7B budget includes new taxes on wealthy

Nov 16, 2016

By MBPC Staff

Great Falls Tribune - November 16, 2016 Gov. Steve Bullock proposed a $9.7 billion budget Tuesday for the 2019 biennium, a 1.4 percent increase over the previous biennium budget, and it includes a new tax bracket for those who make more than $500,000, money for early childhood education and $292 million for infrastructure improvements with some items that failed to pass in the last legislative session. And it leaves the state with a $300 million “rainy day” fund, he said. Republicans who have disputed the governor’s budget projections, saying state revenues were below estimates, called Tuesday’s proposal “unrealistic.” Earlier in the day, Bullock unveiled the state’s two-year spending plan at the Capitol with Budget Director Dan Villa standing to his side. It proposes a $2.3 billion balance in the general fund for fiscal year 2018 and $2.42 billion for FY 2019, officials said. “The budget I am proposing is a reflection of Montana values,” he said He called on the Legislature to approve the budget, which will be known as House Bill 2 in the 2017 session, saying it offered “a steady vision for Montana’s future.” The governor calls for a new 6 percent tax on medical marijuana. Vapor electronic cigarettes will be taxed like regular cigarettes, Villa said. And the governor said he would create a new tax bracket of 7.9 percent, up from 6.9 percent, for people who make more than $500,000 a year. “If you’re making over a half million dollars a year, you can pay a little more and you should,” he said. Republicans said Legislative Fiscal Division staff have told them the ending fund balance picture is even bleaker from the $90 million projected earlier and now at $80 million. “I don’t think it’s a very good place to start,” said Sen. Scott Sales, R-Bozeman, Senate president. Sen. Fred Thomas, R-Stevensville, chairman of the Interim Revenue and Transportation Committee, said the governor’s plan will add $366 million to the deficit scenario, plus the $300 million ending fund balance would force the Republican-controlled Legislature to come up with $666 million that the state does not have. “We’re going into the session not sure how to get to $666 million,” he said. The committee is meeting Thursday and will review revenue projections prepared by the Legislative Fiscal Division. Those estimates are usually at odds with projections prepared by the governor’s budget staff. The governor told lawmakers he insisted on a fiscally responsible budget. “I will not accept a budget that puts Montana’s fiscal health in jeopardy and that fails to fulfill our obligations to the people of Montana,” he said. The governor said his budget proposes decreasing expenditures by $8.7 million in fiscal year 2018 and increasing by $44 million in FY 2019. The rough patch for the energy industry has led to drops in production taxes, and resulted in less-than-expected corporate income taxes and individual income taxes collected by the state. Villa noted that Montana is in better shape than Wyoming and North Dakota, which have seen more drastic cuts than Bullock is proposing. The governor’s budget plan looks to save money by cutting the budgets of all state agencies and to further offset revenue losses by moving money from special accounts into the state’s general fund, Villa said. Bullock’s plan also proposed business incentives and job creation, investing in education, modernizing the tax system and increasing health care access. It also calls for a 1 percent pay increase for state employees in Nov. 15, 2018, and Nov. 15, 2019. The governor said his budget provides tax credits for businesses The infrastructure improvements will be through a mix of cash and $157 million in bonds, state officials said. And it will include funds for the Montana Historical Society and Romney Hall at Montana State University, two contentious items debated last session when a proposed infrastructure bill was defeated by one vote. House Speaker Austin Knudsen, R-Culbertson, said he supports essential infrastructure and he believed the Legislature had “an appetite” for such projects, but said he did not think the historical society building and Romney Hall fit into the “essential” category. Villa said the state Capitol was built with bond money and added he believed the public would be willing to use infrastructure funds for other public buildings as well. He said to say that money could not be used for buildings in the university system was “not a decision that Montanans are ready to make.” Thomas criticized the proposal to create a new tax bracket for people who make more than $500,000. “That kind of class warfare tactic was voted out in the last presidential election,” he said. The Montana Budget and Policy Center, a nonprofit group providing analysis on budget, tax and economic issues, said Bullock’s proposed budget reflects the need to continue to invest in communities. We applaud Governor Bullock’s commitment to working toward a tax system that is fair for all of us,” it stated in an email. “For too long, our tax structure has disproportionately benefited the wealthiest, while leaving many of Montana’s working families struggling to make ends meet.” The Associated Press contributed to this story.