Revenue Estimates: How does Montana Measure Up?

Aug 07, 2014

By MBPC Staff

As we discussed yesterday, governments must know how much revenue the state has in order to assess how much to invest in important government programs. In Montana, we budget for two years at a time (called the biennium) that coincides with our legislative sessions. According to Montana law, the legislature cannot spend more than it receives in revenue. In order to do this, it must first have an estimate of how much revenue the state will receive.

This process is set in state law for how these “revenue estimates” are done. Each November in even years (because the legislature always meets in odd numbered years), the interim committee called the Revenue and Transportation Committee prepares a revenue estimate “projected to be available for legislative appropriation.” This initial estimate is considered the official estimate for the legislative session until it is amended or adopted by both legislative chambers. In general, this estimate is introduced as House Joint Resolution 2 (HJR 2). After the session begins, the initial revenue estimate can be debated, amendments can be made, and both the House and Senate can approve the final revenue estimate.

Now, this is the way the revenue estimate process is supposed to work in Montana. But it doesn’t always work like that. In fact, in recent years, the initial revenue estimate is sent to the House Taxation Committee, but doesn’t go any further. The resolution is not sent to either the full House or Senate for consideration and debate, so the committee’s initial revenue estimate constitutes the official revenue estimate for the legislative session.

According to the new report released by the Center for Budget and Policy Priorities, there are areas where Montana can improve its system – and we agree.

1. The governor and legislature should jointly produce the revenue estimate. Twenty-eight states have a process where there is “consensus” between the branches of government. In the other 22 states (which includes Montana), the governor and legislature produce competing forecasts. In Montana, one House Committee controls the official revenue estimate, which is a recipe for gridlock and political infighting. 

1. Estimates should be revised during the year. Reviewing earlier estimates to adjust them for changing economic circumstances can improve their accuracy. Fifteen states (including Montana) do not regularly review their estimates during the course of the budget year so we do not know how precise our budget is. We do recognize that this one is more difficult in Montana when our legislature meets only for 90 days every two years. 

In Montana, we need to improve our process for revenue estimates. HJR2 is often used as a political football, which does not lead to accurate numbers. If estimates are too low, then there is less funding to invest in the programs we all care about. We will continue to work with the legislature to find ways to improve the process in our state.