More state budget cuts could be on the horizon: How much more can our communities take?

The Montana Budget and Policy Center staff spent their weekend pouring over the 10 percent reduction plans submitted by each state agency to the governor’s office. These plans, totaling over 220 pages, provide a glimpse at how painful these cuts could be for services for Montana families and support for schools, local law enforcement, and counties.

It’s important to note that these proposed 10% reduction plans are coming on top of $218 million in cuts that happened during the legislative session and this summer.

As we’ve discussed in previous blogs, according to the governor’s budget office, the state now faces a $227 million shortfall. In order to restore the ending fund balance back to where it needs to be, the governor and legislature can make further cuts and/or find new revenue. While the governor has some authority to make cuts on his own, the law limits him to cutting no more than 10% in each agency program. In order to reach the $227 million, the governor would have to take the full 10% of cuts in nearly every program.

In other words, if the governor and legislature do not come together to find additional revenue, the governor may be forced to address the budget crisis entirely through cuts and would have to accept nearly everything contained in the agency reduction plans. In that scenario, the Department of Health and Human Services (DPHHS) would experience the largest cut. According to the department’s reduction plan, the general fund cuts total $105 million and would also result in the loss of $135 million in federal funds, for a total loss of $240 million.

Potential cuts to DPHHS include:

  • Eliminate health case management for foster children, provided by Missoula and Cascade County Health Departments and Riverstone Health (Billings).
  • Eliminate supplemental payment to foster parents caring for infants and toddlers to help defray costs for diapers.
  • Cut orientation and mobility skill instruction for 300 children with low vision or blindness.
  • Cut grants for child care providers that help improve quality care.
  • Cut over $2 million in funding for non-profit organizations in Billings, Missoula, and Helena that provide housing and support for teenage mothers.
  • Eliminate partnership with Children Advocacy Centers that provide multidisciplinary evaluation of children victims of violence. This work and cost would be shifted back to local law enforcement agencies.
  • Eliminate funding for mentoring of foster children through eight Big Brothers Big Sisters organizations across the state.
  • Cut funding to domestic violence shelters across the state.
  • Cut $400,000 provided to tribes to assist with foster care placement of tribal children currently in their care.
  • Cut an additional $48 million in targeted case management for individuals with disabilities and those experiencing mental health and substance use disorders (this is in addition to cuts made earlier this year).
  • Eliminate funding for services for developmentally disabled and at-risk children ages 0-36 months.
  • Eliminate Medicare prescription drug benefits for over 10,000 low-income seniors.
  • Cut $6.8 million in services for home and community-based services for seniors and people with disabilities who want to stay in their home or community, likely forcing more Montanans into nursing home care.
  • Cut $8.5 million in hospice services.
  • Cut $15.5 million in personal assistant services for seniors and people with disabilities living in their own home.
  • Eliminate health insurance coverage for direct care workers who are already struggling to make ends meet.
  • Cut $23 million in reimbursement rates for hospitals providing care to Medicaid patients, including cuts to payments for Montana’s rural critical access hospitals. These cuts could mean reduced access to services in rural Montana.
  • Eliminate Medicaid’s coverage for some dental services, which could impact over 44,000 Montanans and 585 dentists providing coverage to Medicaid patients.
  • Cut $1.6 million in chemical dependency treatment.
  • Reduce grants to counties for mental health crisis intervention.
  • Close 19 offices of public assistance in rural Montana, impacting many families’ ability to access assistance and services.
  • Leave significant number of staff positions vacant through biennium (between 8% and 18% of positions in each division will be left unfilled).
  • For some remaining Department staff, mandatory furloughs that will cut hours by 7% to 12.5%.

This list is just cuts to DPHHS. Make no mistake, every program in every agency is facing cuts, but there is time to do something about it. The governor and legislators must come together to find a balanced solution to this crisis. Otherwise Montana is set to take a total of $500 million in general fund cuts in this biennium.

While some cuts may be inevitable, common sense measures to increase the tobacco tax and close tax loopholes would mitigate deeper cuts that will hurt our communities. These proposals should be part of the conversation. There are solutions to ensure that our tax system is fair, raise critical revenue, and help Montana be the state we all love to live in.

Perspective on the State Budget

Yesterday, the governor’s office announced that the state could be facing more budgetary cuts in the coming months. Montana law requires the executive branch to ensure the state’s ending fund balance, or Montana’s rainy day fund, is kept at a certain level. With revenue levels down, the governor’s budget office has stated that the projected ending fund balance is now likely below that minimum amount.

We will be digging through more details over the coming days to examine the impacts of further cuts. First, we want to take a step back because it’s important to remember that any cuts considered now will be on top of the nearly $220 million in general fund cuts that were already taken through legislative action earlier this year.

The Governor’s Proposed Budget

In the chart below we’ve contrasted the governor’s proposed budget with the actual budget, determined through legislative actions. In advance of the session, the governor’s budget proposed a balanced approach that included cuts, as well as tax fairness measures, to bring the ending fund balance back up to $300 million. These tax fairness measures would have ensured out-of-state corporations and the super wealthy are paying their fair share and included a long-overdue increase to the tobacco tax.  The bar chart on the left shows the components of governor’s proposed budget, including the proposed cuts (in red and yellow) and proposed new revenue (in green). (Items below the black line are new spending or expenditure proposals that would lower the ending fund balance.)

Legislative Action

The bar chart on the right shows the budget crafted by the legislature. In total, through both the 2017 session and the further cuts triggered in SB 261, the legislature has cut over $220 million in general fund investments. These included cuts to health services for our most vulnerable Montanans and cuts to investments in higher education that will result in higher tuition for many Montana families. (The legislature also passed new spending proposals, also reflected in the boxes below the black line.)

While more cuts seem inevitable, we cannot continue to ask Montana families and communities to bear the brunt of these difficult times. The state had multiple opportunities to raise needed revenue to stave off these devastating cuts. Now is the time for policymakers to work together to revisit the need for more revenue.

2019 Biennium Impact to General Fund Ending Fund Balance

Senate tweaks bill, but it still spells disaster for Montanans

Yesterday, Senate GOP leaders released a discussion draft making some changes to its bill to repeal and replace the Affordable Care Act.

The big picture: none of these changes alters the overall impact of this bill on Montana. It will leave tens of thousands of Montanans without insurance, increase insurance for many more Montanans, and shift billions of dollars in costs to the state that will likely lead to deep cuts to Medicaid coverage.

Leader Mitch McConnell has indicated that the Senate will take a critical vote early next week to proceed to this bill. Here is a quick recap of some of the changes proposed to the Better Care Reconciliation Act (BCRA):

The bill makes no significant changes to the devastating cuts to Medicaid. Previous analysis that Montana would face the loss of roughly $5 billion in federal Medicaid funds likely still holds true. While the bill adds some smaller changes to the Medicaid provisions, many of the minor “fixes” are temporary and are no substitute for actual health insurance coverage. By 2036, Congress will have cut more than a third of Medicaid funds, leaving states to figure out how to provide coverage to the most vulnerable Americans, like low-income children, seniors, and people with disabilities, with significantly fewer federal dollars to do so.

Funding for opioid treatment is a drop in the bucket compared to what Medicaid coverage and Medicaid expansion is doing. The bill adds $45 billion for states to provide opioid use treatment, but this pales in comparison to what Medicaid is already doing and can continue to do for substance use disorder (SUD) treatment. Medicaid is the single largest payor for SUD treatment. Eliminating Medicaid expansion will result in tens of thousands of Montanans losing coverage, many of whom are getting preventative care, mental health treatment, and SUD treatment that they have never received before. It’s like pulling a patient out of the ICU and handing them a Band-Aid. 

Added funds for home and community-based services creates a false sense of security for states that will face growing health care costs and a growing aging population. The bill provides states with additional federal matching funds for increased payments to providers for home and community-based services (HCBS) for aging Americans, but these funds are temporary and cannot be used to expand services to additional individuals. With the deep cuts in federal Medicaid funds, it’s unclear how helpful this will be if/when the state has to cut current HCBS to cover other mandatory Medicaid costs.

The change to move costs associated with public health emergencies outside of the Medicaid per capita cap is narrow and insufficient. This change would allow states to apply to ask the feds to exempt costs associated with a public health emergency from the per capita cap amount, but it is not at all certain how this would work. The feds could deny an application, and even if it is approved, the amount is capped and would not factor in other increased health care costs within Medicaid (ex., new technology or new drugs).

The “Cruz amendment” makes this bill even worse, and sicker and older Montanans won’t be able afford insurance. The bill would allow a state to offer pared-down plans, as long as the state provides one insurance plan that complies with current Affordable Care Act requirements. This has the effect of bifurcating our insured population into two: those who are older or sicker, who need comprehensive coverage, and those who are younger or healthier (at least healthy right now), who will choose less comprehensive coverage. By siphoning off younger individuals, those who are older or sicker and need good insurance will be forced into a plan that is very expensive (and in many cases, unaffordable). This will be particularly the case for middle-income families who are also losing access to tax credits under this bill.

Now is the time to make your voices heard. The Senate needs to scrap this bill, start over, and work in a bipartisan manner to make health insurance more affordable and stabilize the health insurance marketplace.

Mother’s Day: What Moms need is health care

We hope moms and moms-to-be around the state had a wonderful Mother’s Day.

Because we love our moms and we are a female-led organization, our team spent time looking into how the House GOP bill to repeal and replace the Affordable Care Act (ACA) might affect women, and moms specifically.

The ACA changed the landscape for women’s health insurance coverage. As we await the Senate’s version of a bill, it is crucial to understand the particular damage that ACA repeal poses for women’s health and economic security.

We know that much attention has been given to the provision of the AHCA that allows states to waive the “essential health benefits” coverage for individual market plans. Which basically means that pregnancy, c-sections, or injuries from domestic violence are included as pre-existing conditions and subject moms and women to significantly higher premiums.

However the issue of fundamentally changing Medicaid is equally as detrimental to moms in our state and country. As it stands, the House health bill would have devastating consequences for the nearly 40 million women across the country who rely on Medicaid. In Montana, 129,200 women are enrolled in Medicaid and 35% of births are financed by Medicaid.

The House-passed bill would slash Medicaid by more than $800 billion over ten years by effectively eliminating Medicaid expansion to low-income adults and imposing a “per capita cap” on the program.

Women would bear a disproportionate impact of these cuts because they are not only the majority of Medicaid beneficiaries, but are also the primary utilizers of family planning and maternity care, benefits that could be eliminated with devastating federal cuts to Medicaid.

In addition, Medicaid expansion gave many women not raising children access to coverage and offered continuous coverage to new mothers who had qualified while pregnant but would not have qualified after their pregnancy. Ending the expansion would take these benefits away.

There are a few other benefits the ACA gave women that could be lost with repeal. One is breastfeeding. The ACA covers lactation support and counseling, equipment and supplies, such as pumps, and infrastructure, such as pump rooms and break time. The other is access to birth control which provides health benefits for women and children, improves women’s ability to control whether and when they have a child, and fosters women’s ability to participate in education and the workforce on an equal footing with men. The ACA was a total game-changer when it comes to access to birth control for women because it removed the cost barriers. Women no longer have to pay out-of-pocket costs or choose between paying for birth control and paying for other necessities, like groceries and utilities.

The ACA and Medicaid have been hugely beneficial for women’s health. With the potential repeal hanging above us, women – and mom’s – have a lot to lose. While the future is uncertain, we want to make sure that women and moms continue to have access to affordable health care. We encourage all moms, women, and the men in their lives to contact our Montana Senators and tell them to reject any health bill that causes people to lose coverage, caps or cuts Medicaid, ends the Medicaid expansion, or takes away critical protections.

Montana Budget Not Ready for Prime-Time

With less than two weeks remaining in the legislative session, the state budget is far from ready for the governor’s signature. Last week, legislative fiscal division released its updated status sheet. Factoring in the current spending bills, tax bills, current revenue estimate, and the budget, the legislature is leaving the state with a mere $162 million in projected ending fund balance. That current level is $138 million below the long-standing precedent for a $300 million ending fund balance. Perhaps even more shocking, it’s $38 million below some Republicans’ counter-proposal for a much lower $200 million ending fund balance.

Thus far, the legislature has:

  • Failed to support nearly all of the governor’s tax fairness measures that would raise needed general fund revenue and provide a pathway for a balanced solution to the recent revenue downturn;
  • Left significant cuts to the budget, particularly in the areas of higher education and social service programs for our seniors and Montanans with disabilities;
  • Passed a myriad of new spending bills that risk leaving an insufficient ending fund balance for dealing with an economic downturn or lower-than-expected revenues; and
  • Increased the revenue estimate simply as a mechanism for balancing the budget.

Any one of these problems should cause concern for the governor and any Montanans who care about the budget and the essential services it funds. The combination of the current problems is simply unacceptable and unsustainable.

The legislature has so far failed to make the difficult choices necessary for a responsible budget. As has been true all session, they have two choices: make further cuts to the budget and other spending priorities or raise revenue. MBPC believes only one responsible choice remains: raising revenue. With significant cuts already proposed by the governor and deeper cuts adopted by the legislature, the legislature must, finally, engage in a meaningful conversation about sensible ways to raise revenue. Options include listening to the dozens of health care professionals and organizations who have asked for an increase in the tobacco tax (which not only raises revenue but also is proven to reduce smoking and decrease health costs) or making sure that millionaires in Montana are paying their fair share for the services and infrastructure that make our families and communities stronger.

It may be that legislators are planning to force the governor to make the additional cuts to popular and essential programs. The governor did his job in proposing a responsible budget, one that included both difficult budgetary cuts but also adequate levels of revenue. Legislators were elected to make the same kinds of hard decisions. If they are going to reject every general fund revenue increase, they need to find other solutions for putting a responsible budget on the governor’s desk.

A Budget Built on a House of Cards?

Today, the legislative fiscal division (LFD) released its weekly general fund status sheet, providing us a glimpse at where we stand with general fund revenue, projected spending, and the resulting ending fund balance. As the legislature takes actions on bills, including HB 2, LFD updates the status sheet to reflect these changes in spending and revenue bills.

This past week, the Senate Finance & Claims Committee took action on HB 2, adding back some of the cuts made in the House. In total, the Committee restored about $10 million in general funds, $32 million in state special revenue, and $12 million in federal funds.

The status sheet answers a big question: is restoration of these cuts sustainable under the current levels of revenue? The answer: no.

As of today, legislative fiscal division estimates an ending fund balance of $154 million at the end of the next biennium. The status sheets factors in SB 354 to raise the tobacco tax, which passed the Senate this week. This measure raises nearly $69 million in general fund revenue, but still needs to pass the House to become a reality. Even factoring passage of SB 354, we are $145 million below the Governor’s requirement of a $300 million ending fund balance. The ending fund balance is important because it is Montana’s only mechanism for protecting against revenue volatility and unexpected emergencies. This is Montana’s savings account.

Those who have been worried about the budget cuts – including cuts to Medicaid services for seniors and people with disabilities, cuts in higher education, and cuts to programs essential for our emergency responders in local communities – still have work to do. Higher education still faces over $11 million in cuts. Just as importantly, the budget still has several important stages to go and cuts can still be reinstated or increased. As it stands now, the budget is built on a house of cards that could collapse at any moment. We need to continue to be diligent in urging policymakers to pass new revenue and update the revenue estimate, to ensure adequate resources to fund programs essential to our communities.

Want to know more about actions taken this past week on the budget? Check out our quick summary here.

Senate Finance & Claims Acts on Budget Bill, Restores Some Cuts

Senate Finance & Claims met on Tuesday to take executive action on HB 2. You can find all the amendments online here (third tab). The Legislative Fiscal Division also updated its budget narrative with actions from Finance & Claims. Here is a quick overview of some of the key actions taken.

Dept. of Public Health and Human Services. The committee restored the $14.9 million legislative cut to senior & long-term care (SLTC) division, which provides Medicaid services to seniors and individuals with disabilities who are living in their homes or in nursing homes. A third of this restoration was a shift in funds from Health Resources Division, which provides Medicaid services. SLTC division is still $11.6 million below the executive budget. The committee also reduced the vacancy savings required by the Department from 8% to 6%.

Office of Commissioner of Higher Education. All in all, the higher education budget is largely in the same spot as it was when it passed out of the House. Legislators moved amendments to restore the deep cuts to the universities, but those amendments failed. To date, higher education is still about $11 million below the executive budget, and university officials are indicating we are likely to see 18 percent increases to tuition if the levels of funding remain where they are now. Despite those persisting cuts to higher education, the funding formula for community colleges was fixed to reflect a slight increase in the state’s share of the formula. 

Office of Public Instruction. Legislators moved an amendment to add an investment for preschool programs, but it failed on a party-line vote. However, the committee did pass amendments to provide an inflationary adjustment for special education funding (albeit smaller than previously proposed), and restored funding for both the Montana Digital Academy and the Data for Achievement payment. However, in total, OPI’s budget was reduced by approximately $13 million over the biennium.

Dept. of Labor & Industry. Department of Labor & Industry saw restorations, including state special revenue funds added back for Jobs for Montana Graduates Program, which provides graduation support and job training for high school students across Montana. The Committee also restored some funds for the Employment Relations Division, which is good news for workplace safety in Montana.

Dept. of Military Affairs. The Committee restored some funds within the Department of Military Affairs, including support for Air National Guard and Army National Guard. However, the Committee did not restore the funds provided to help train local emergency response teams handling hazardous material disasters and cleanup.

House Appropriations Passes Budget But Leaves Devastating Cuts

Following two lengthy days of hearings, the House Appropriations Committee made amendments to HB 2 on Thursday and Friday and passed it out of committee. The full House of Representatives will begin debate on HB 2 later this week. While the Committee passed several amendments to partially restore some funds, the budget still includes devastating cuts to programs critical to Montana’s students, seniors, and our most vulnerable communities.

To recap, legislative leaders began the budgetary process in January, by adopting cuts in the governor’s proposed budget and then taking additional deep cuts to nearly every state agency. Subcommittees worked through January and February and added back some funds. However, most of those additions simply reflect present law adjustments, or the amount of funds needed to continue existing services into the next biennium, and did not restore the deep cuts to the underlying programs.

Areas facing the deepest cuts include senior and long-term care, which provides Medicaid services to seniors and Montanans with disabilities, and higher education, with major cuts to Montana’s colleges and universities.

Here is an update on what happened in House Appropriations last week:

  • The deep cuts to Senior & Long-Term Care (SLTC) largely remain. While the Committee passed an amendment to add back some (but not all) federal funds, it did not add general fund dollars. This action is meaningless. In other words, if the legislature fails to appropriate state general fund dollars, Montana will not receive the federal matching funds. Therefore, SLTC continues to face a budget hole of $53 million in total funds below the present law budget. The Committee considered amendments to: fully restore legislative cuts to SLTC; pare back the current 8% vacancy savings; provide an increase to direct care worker wages; and restore funds for respite services for family caregivers. All of these amendments failed. The committee did add back about $200,000 in funds for independent living contracts within the Disability & Employment Transition Division.
  • Deep cuts to higher education remain, even with the additional $11.6 million in higher education funding, but this represents only 1/3 of the cuts below a present law budget. Of this $11.6 million, about $9 million will go to the MUS units (MSU, UM, and satellite colleges and universities). With this restoration, community colleges received of $1.7 million, and Tribal colleges received $81,000. Amendments to add back additional funds for the university units, funds for the Montana Seed Lab, and funding for the Governor’s Best and Brightest Scholarship fund, all failed to pass. Prior to full Committee action last week, the higher education budget sat about $30 million below present law budget. This includes the $23 million in cuts taken in early action, as well as a $7.8 million present law adjustment that the Subcommittee did not take. Again, simply looking at a comparison of present law budget with legislative action so far, the Committee action last week restored about one-third of the total $30 million in cuts below the present law.
  • The Committee restored funding to support child care providers and improvements to quality care. The STARS to Quality program is a voluntary program for child care providers to improve quality of early childhood education and care. Previously, the subcommittee added back the one-time-only funds for STARS to Quality, but made the funding contingent upon the passage of a bill to legalize and tax blackjack. The full Appropriations Committee stripped that contingency language, providing $2.4 million in OTO funds for STARS to Quality.
  • The Committee failed to pass an amendment to restore funds for workplace safety programs. Subcommittee action included cuts to the Employment Relations Division, cutting about $1 million within the workplace safety division. Legislators noted that Montana has ranked as one of the worst states for the number of workplace accidents. This cut will result in greater pressure on the Department of Labor and will likely increase accidents in the workplace. An amendment to restore the funds failed to pass.
  • Efforts to restore funding for Department of Military Affairs failed, including funding to support regional response teams. The early cuts in the session included across-the-board reductions to Department of Military Affairs and cuts to the 6 regional hazardous materials teams with Disaster & Emergency Services, which provides training and assistance to local response teams handling hazardous material. The cut in state funding results in additional loss of federal funds. An amendment to restore these funds failed.
  • The Committee restored funds for the Governor’s airplane.

The full House of Representatives will hear HB 2 later this week, presenting another opportunity to restore these deep cuts, and ensure that our seniors and Montanans with disabilities can continue to receive the services they and their families in need.

Budget Troubles Loom Large Second Half of Legislative Session

This week the Legislative Fiscal Division released a 694-page HB 2 Narrative summarizing final Joint Appropriation Subcommittee action, comparing the current legislative budget to the executive proposed budget and to the last biennial budget. The Narrative includes a 12-page summary as well as more in-depth analyses of each agency. The summary section is a helpful overview of changes the legislature has made so far compared to the executive budget. However, this year the overview could easily lead a reader to believe that legislative subcommittee action left the state budget and the programs, services, and infrastructure it funds in much better shape than it actually is.

Here are the main highlights from the LFD Narrative:

  • The legislature cut general fund appropriations by $43.8 million from the executive’s budget and $19 million from the 2017 biennium budget.
  • The legislature’s appropriations of state special revenue cut $46.7 million from the executive’s budget and $44.8 million from the 2017 biennium budget.

While the legislature appears to have provided a far greater amount of federal funds in HB 2, this requires some additional clarification:

  • The Governor proposed to appropriate $359 million in federal funds for the Supplemental Nutrition Assistance Program (SNAP) through a statutory appropriation, rather than HB 2. After discounting this fund shift, the increased federal dollars from the executive budget is only about $207 million.
  • Of this $207 million in federal funds, $193 million is federal funds for highway dollars tied to matching state dollars. In order to restore federal highway dollars, the legislature has made state funding cuts to the Montana Department of Transportation. (See below for more info.)
  • Finally, over $50 million in federal Medicaid funds were added to the DPHHS budget for Health Resources Division in late subcommittee action as a result of updated caseload estimates, a routine process that occurs throughout the budget creation process. This adjustment does not restore the almost $90 million in cuts made to DPHHS alone.

Some additional commentary on subcommittee action

An important comparison to consider is how the legislature has funded programs compared to the present law budget, or the level of funding necessary to maintain current government services. As LFD notes, “present law gives the legislature a baseline budget presentation and illustrates a beginning point of the legislative budget decisions that require legislation.”

In early action by the legislature, subcommittees cut hundreds of millions of dollars in total funds to agencies. While subcommittees have added back some funds, nearly all of these additions reflect present law adjustments needed to continue existing services. So it is helpful to look at the present law budget as a baseline and then factor in the cuts or additions made beyond these adjustments. An initial take shows that the legislature has cut more than $100 million from the core programs and services that help make our communities and families safe, healthy, and economically secure.

Below are some initial thoughts on how things are faring for programs essential to our communities. These aren’t just numbers and dollar signs. They represent devastating cuts to services for seniors and people with disabilities and probable double-digit tuition increases for students and their families.

The slight budgetary increase to DPHHS reflected in the LFD Narrative is a result of standard inflationary adjustments and additional federal funds for caseload adjustments. Essential programs for seniors and individuals with disabilities continue to face deep and devastating cuts. While the present law adjustments for DPHHS reflect an increase of total funds of about $97 million, the Department is also taking a cut of $89 million in total funds in “new proposals.” These cuts represent $2.2 million cut to Disability and Employment Training Division that provides services to people with disabilities, including counseling, career training, transportation, adaptive equipment, and independent living services.

Senior and Long-Term Care, which administers Medicaid services for seniors and persons with disabilities, including Meals on Wheels, transportation services, in-home assisted living services, and nursing homes, continues to see the deepest cuts in DPHHS. In addition to negative present law adjustments, the legislature has cut $53 million in total funds for programs, potentially impacting provider rates, worker wages, and services for seniors living in their own homes and those in nursing homes. Montana’s population continues to age, and projections show that by 2025, nearly one-fourth of the state’s population will be over the age of 65. We should be very concerned about how these cuts will harm seniors and their families today, but also concerned about how these cuts set the stage for declining services in communities over time.

The legislature has funded Montana’s colleges and universities at $33 million below the past biennium, risking double-digit tuition increases for students and families in the next biennium. As discussed in our past report, early actions by the legislature reduced higher education investment by approximately $23 million. On top of this, the legislature did not provide the standard present law adjustment to the university system, representing an additional $7.8 million in cuts to a fully funded budget.

The Legislature’s effort to restore federal highway funds relies heavily upon deep cuts to the Department of Transportation, which could impact the health and safety of all drivers and future federal funds. Some legislators and the broad Montana Infrastructure Coalition have called for an increase to the state gas tax in order to avoid losing $193 million in federal matching funds used for construction and maintenance of roads, highways, and bridges. Instead, the budget subcommittee that oversees the Department of Transportation (MDT), dramatically cut state funding for MDT and used those savings to shore up the state highway account used to match federal funds. This plan would eliminate 75 vacant positions and cut overtime pay. MDT has raised concerns that this level of cuts could impact safety, which could result in failing to meet federal standards and a corresponding further loss of federal funds.

 

The Legislature will come back from its break next week and will have 45 more days to ensure we continue to invest in the services our families rely upon. Seniors, people with disabilities, students, and families who want a better life for their children shouldn’t be asked to shoulder the entire burden of our state revenue downturn. Montana can get to a balance budget while funding essential services, by ensuring we have adequate revenue and that everyone is paying their fair share.

Oil and Gas Tax Holiday: It is time to end this free ride

The 2017 Montana Legislature has been marked with concern over massive budgetary cuts and the major shortfall in revenue. While not all cuts can be avoided, the legislature should take a balanced approach to ensure the state can continue to invest in our families and communities. This includes ensuring we have adequate revenue in the state by putting in place common sense measures to ensuring wealthy corporations are paying their fair share.

Earlier this session, the House Taxation Committee heard House Bill 215, an act revising the rate of tax for certain oil and natural gas production. Reducing or even eliminating this tax break, called the oil and gas tax holiday, is one step toward balancing the budget and making sure corporations are paying their fair share. Unfortunately, the House Taxation Committee tabled HB 215 earlier this week.

The oil and gas tax holiday is a policy that allows newly drilled wells to be taxed at a substantially lower tax rate during the beginning of production. Wells, however, produce significantly higher amounts of oil and gas at the start of usage, which means these oil companies receive this tax break during the most profitable period of extraction. While some argued these tax holidays attract developers and increase revenue, the data clearly shows such tax holidays only suppress potential state revenue and does little to increase developer interest.

Montana, despite its lower tax policies, is not outperforming neighbors with higher tax policies. Wyoming, New Mexico, and North Dakota all have higher taxation rates for oil companies. All three states have consistently out produced Montana in terms of barrelage. Oil and gas companies do not seek to drill based upon the tax policy of that area. They drill where there are natural resources available.

Montana has lost millions of dollars in revenue due to this tax policy. From 2008 to 2014, the tax holiday cost the state and counties $265 million in revenue. This money could have been used to pay for public services, such as schools and roads. In oil-producing counties, especially those near the Bakken region, they have been forced to deal with increased demand on their infrastructure, but no increased revenue to update such necessary services.

HB 215 proposes to increase in Montana’s production tax would to 4.5 percent, which is still lower than the national standard of 9.26 percent. But even this small step is crucial in insuring our legislature can make strategic investments in Montana communities.

The increased revenue could be used to assist in failing infrastructure, public services, and our schools and universities. Oil and industry should not get a free ride in this state. We all need to pay our fair share especially when so many Montanans are struggling with significant budget cuts.