House Taxation Committee chair reluctantly backs higher revenue estimate

HELENA – The House Taxation chair reluctantly urged the committee Monday to adopt what he called a political decision to boost the state’s three-year revenue estimate by $43.6 million more than what a separate panel recommended in November. Taxation Committee Chair Mike Miller, R-Helmville, is sponsor of House Joint Resolution 2, which estimates state general fund revenue from all tax and interest income sources for fiscal 2015, 2016 and 2017. The Taxation Committee is expected to vote Thursday on the proposed amendments to the resolution. At a hearing Monday, Miller said the bipartisan Joint Subcommittee on Revenue Estimating on Friday unanimously recommended a general fund revenue estimate of $6.761 billion for fiscal years 2015, 2016 and 2017. This subcommittee was created to iron out differences between competing revenue estimates from the governor’s Office of Budget and Program Planning and the Legislative Fiscal Division. The panel’s rosier revenue forecast didn’t reflect the conclusions of outside experts who spoke Friday, Miller said. “In my opinion and apparently theirs also, the recommended estimate is still too high,” he said. “However, the political reality is that this estimate, along with the recommendation from the subcommittee that I bring before you today, is a major part of what is required to avoid the governor’s veto of House Bill 2 (the major budget bill).” Miller said the Revenue and Transportation Interim Committee “politicized” the revenue estimate in November by adding $141 million to what the Legislative Fiscal Division had recommended then. The subcommittee’s recommendation Friday was $232 million more than the Legislative Fiscal Division estimate as of March and $83 million lower than what the governor’s budget office recommended. Miller didn’t serve on the joint subcommittee, but one legislator who did, Rep. Kathleen Williams, D-Bozeman, responded to Miller’s comments that it was a “political” process. “I guess you could call it political,” Williams said. “I would call it policy. We have a reasonable set of numbers to move forward.” She said the subcommittee did some good work in comparing the assumptions and models used by the legislative and executive revenue forecasting offices to come up with a revised number. The subcommittee’s proposed estimate played to mixed reviews. The governor’s budget director, Dan Villa, said he still believes the estimate should be raised more. But he said it is “much more reasonable, still slightly understated, but frankly, we’re not going to let the perfect be the enemy of the good.” Heather O’Loughlin, co-director of the Montana Budget and Policy Center, said the group supports the revised estimate reached by the joint subcommittee. “This has a critical impact on the state’s ability to invest in our local communities,” she said. But Bob Story, a former legislator who heads the Montana Taxpayers Association, said, “I don’t share the optimism that the subcommittee did or the budget office does.” Story said he believes the projected revenues from individual and corporate income taxes are too high, given the drop in oil prices and the fact that the prices of a number of commodities are down. “I would hope that you would be cautious in your revenue estimate,” Story said. In his closing, Miller warned of the risks of having a revenue estimate being either too low or too high. “If the estimate is too low, we leave money on the table and don’t fund some things, but we end up with a larger ending fund balance, commonly referred to as a surplus,” Miller said. “That money can be spent in the following session.” But if the estimate is too high, he said the Legislature will end up funding state agencies and programs at a level that is not sustainable. State law gives the governor the power to cut programs if revenues drop by a certain percentage. “If he cannot cut enough, then we get to come back in a special session and make the additional tough cuts,” Miller said. The chair said he sincerely hopes the Legislature doesn’t have to return for a special session, “but I remain pessimistic in that regard.”