The great part of being a political outsider is you get the opportunity to look at existing government budgets and legislation with a fresh view. As a freshman member of the 65th Montana legislature, serving on the House Appropriations committee, I am examining the budget shortfall, which is the hot topic in Helena. Citizens from all over the state are rightfully wary.
So how did we get into this situation?
First, we have to remember that the legislative branch meets every two years and passes a balanced state budget. It is our single constitutional duty. Once the budget is passed it is up to the executive branch to execute on that budget.
The analogy here is that in 2015 the legislative branch built the car and then gave the keys to governor’s office to drive it. Now that we’ve returned to Helena for the 2017 session, it is clear that the car was wrecked.
Here’s how it happened. The Legislative branch gives the governor a cushion, called the Ending Fund, which is used to manage the state’s financial volatility. The revenue projections that the state expected to take in through taxes went up only 5.6% but spending increased 18.9%. In 2013 we had an ending fund balance of about $537M and it will be down to $79M this year (these numbers are public information from the Office of Legislative Fiscal Division). That’s a $458M loss. For reference, we need about $200M in the Ending Fund to be structurally solvent, so this balance is very troublesome. Cash flow is the problem.
Why didn’t we prepare for our shortfall? Simply put, the timing of the shortfall coincided with Governor Bullock’s desire to get re-elected. So rather than face the hard choices and cut cost gradually, Bullock decided to make it seem as if the state finances were sound. This move did not hinder the governor in his election bid, after all, the public does not get excited about balance sheet implications. On the other hand, cuts to the agencies would have created a political firestorm that would have cost him votes with those affected by the cuts. It was a politically expedient move, but not good governance or sound leadership.
Because the governor stalled in cutting cost we now need aggressive action. The question remains whether the governor will own the situation or continue to play politics. Early signs point to politics.
Last week the Senate and House appropriations committees met with executive agencies to ask them to volunteer any funds to beef up our 2017 cash flow problem. They claimed they had only $5M over the next six months to return to the Ending Fund (out of $2.03 billion annual expenditure). The governor’s budget director explicitly told us that his agencies would not offer up any funds. "We don't have anything to give for 2017," said one agency director. Her budget is $522M annually but not one dime could be spared. It was her third day on the job, which makes you wonder why she was so certain they had no extra funds. That smells political.
The School for the Deaf and the Blind, not under the governor’s influence, offered up $250,000 or 4.5% of their budget to help the state’s budget problem. That is honorable and should be noted.
To further politics, the Governor proposed to increase spending by $78M, while raising taxes $123M and cutting 27 highway patrol jobs. These moves won’t provide the funds to come close to balancing the budget, but it provides good political theater. The Republicans won’t raise taxes and now we are forced to lay off the finest people we have on the Highway Patrol, he will undoubtedly claim. The truth is that government expenditures increased almost 18.9% and we still cannot meet our obligations. It is time to trim the bureaucracy as a whole.
As we start the 65th legislative session, the last thing we need is the governor to pit his staff against the legislative branch. We are all in this together and have to be pragmatic. All of the tax increases that the Governor has proposed won’t pass, so we must work together to lower government spending in a meaningful way that protects vital services (highway patrol jobs) as well as the most vulnerable among us.
There is good news: the structural balance is forecasted to return to normal near 2019 if revenues rebound. The bad news is that we find ourselves in a very tough short-term position and we must balance the budget. The best news of all is that a simple 3-5% reduction across government spending will solve the short-term situation. This is not at all dogmatic; we just need a little belt-tightening. Tough times need leaders, not politicians.