Last week we discussed the difference between the Office of Budget and Program Planning (OBPP) and the Legislative Fiscal Division (LFD). We explained that OBPP is responsible for reviewing all legislation and ballot initiatives and preparing an analysis of its financial impact to the state both in terms of expenditures and revenues. These are called fiscal notes and that is this week’s wonky word.
According to Montana law, all bills reported out of a committee of the legislature and have an effect on the revenues, expenditures, or fiscal liability of the state or local government must include a “fiscal note” that explains the financial impact. (Those bills that appropriate a specific dollar amount do not need a fiscal note.)
So, basically a fiscal note is a document that explains the budgetary impacts of a piece of legislation or ballot initiative. Fiscal notes detail how much a bill would cost the general fund or state special revenue accounts, in addition to how much revenue it would bring in or the amount of revenue that will be reduced. Fiscal notes not only show impact for the current fiscal year but also make projections for the following three fiscal years.
Some fiscal notes are very simple like the fiscal note in 2013 for SB 673. The legislation originally proposed to establish practice rules for the state scholarship program for students entering medical school. (This bill was later amended and became the vehicle for Medicaid expansion, but just disregard that for today’s lesson.) From this fiscal note, you can see that it originally had a $9,000 cost to the general fund and no revenue implications. The OBPP had some technical concerns about the bill (if you look at the boxes at the top and written out at the bottom.)
Others are much more complicated like the fiscal note for SB175, the school funding bill related to oil and gas production tax revenue from 2013. Clearly, this is a bill with a much bigger impact on the state budget both for expenses and revenue. The fiscal note explains the assumptions made and definitions used in how the fiscal impact is calculated. OBPP worked with the Office of Public Instruction (which governs K-12 schools) and the Department of Revenue to come up with its estimate. (Reading this fiscal note you should recognize many of our wonky words from our back to school funding wonky word series.)
It is important to note that even bills that will reduce the tax revenue like SB 96 (a bill that lowered the business equipment tax), those tax cuts are written as expenses in a fiscal note. Anything that impacts the general fund is considered an expense.
Fiscal notes are not required for every bill, but most bills with any fiscal impact at all have one. Fiscal notes are critical to helping legislators and the public understand how we invest our public dollars. So next time someone tells you how much a bill would cost, go to LAWS and look up the fiscal note. The more informed we all are, the better we can help our elected officials make decisions that our good for our entire state.
MBPC is a nonprofit organization focused on providing credible and timely research and analysis on budget, tax, and economic issues that impact low- and moderate-income Montana families.