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Montana lawmakers return for deficit-focused special session

UPDATED: Sun., Nov. 12, 2017

In this Nov. 15, 2016 file photo, Montana Gov. Steve Bullock, left, and the governor's budget director, Dan Villa, outline Bullock's proposed budget for July 2017 through June 2019 on Nov. 15, 2016, in Helena, Mont. (Matt Volz / Associated Press)
In this Nov. 15, 2016 file photo, Montana Gov. Steve Bullock, left, and the governor's budget director, Dan Villa, outline Bullock's proposed budget for July 2017 through June 2019 on Nov. 15, 2016, in Helena, Mont. (Matt Volz / Associated Press)
By Amy Beth Hanson Associated Press

HELENA, Mont. – Montana lawmakers return to the Capitol this week for a special session to address a projected $227 million budget deficit.

Gov. Steve Bullock, a Democrat, proposes covering a third of the shortfall through cuts, a third through transfers and a third through temporary tax increases.

“It’s time Montana leaders fulfill our responsibilities to the people we represent and balance our budget in a way that makes sense for Montana taxpayers, workers, and families,” Bullock said in announcing the special session.

Senate President Scott Sales, a Republican from Bozeman, said Friday that Republicans polled lawmakers and a majority voted in favor of expanding the session to consider other options in an effort to avoid tax increases.

Here are some other things to know about the session:

Balanced budget mandate

Lower tax revenues and an estimated $75 million in fire costs have prompted this year’s special session because the state Constitution requires Montana to have a balanced budget.

The administration has argued the Republican majority in the 2017 Legislature adopted an unrealistic revenue forecast to avoid increasing taxes or making further cuts.

Meanwhile, negotiations and meetings have been going on behind the scenes and in the news as both sides argue their positions.

Governor’s proposals

What Bullock is recommending, after negotiations with Republicans:

Cut $76.6 million in general fund spending, including $49 million from the Department of Public Health and Human Services along with about $4.4 million each from the departments of Correction and Justice and the Office of the Commissioner of Higher Education.

Temporarily increase taxes on hotels, rental cars and campgrounds.

Temporarily suspend employer contributions to the overfunded judge’s retirement system

Suspend employer contributions to the state employee health plan for two months

Delay a grant program that was to be implemented if the coal-fired power plant in Colstrip closed and terminate other block grant programs

Other ideas Republicans want considered:

A longer suspension of employer contributions to the state employee health plan

“We think we can tap that to a larger degree than the governor plans to without causing undue negative effect to that fund balance,” Sales said.

The administration counters that withholding $10.6 million over two months will cause the plan to take a $25 million hit due to the loss payments outside of general fund money.

Tapping over $30 million the state has set aside for the possible purchase of the private prison in Shelby. The money is controlled by the owner and manager, CoreCivic, under its contract with the state. In exchange, CoreCivic has told lawmakers it wants its contract to run the Crossroads Correctional Center extended by 10 years. The 20-year contract is scheduled to end in 2019.

The administration doesn’t think it’s wise to agree to a 10-year contract during a three-day legislative session, especially given recent legislative efforts to reduce recidivism with the goal of reducing the number of people in prison. However, some lawmakers are adamant that the prison money be part of the deal.

Voting on Bullock’s proposed cuts

In announcing the session expansion, Senate President Sales said lawmakers were “going to make sure that Governor Bullock’s cuts are talked about and voted on.”

That’s a reversal from a month ago when House Speaker Austin Knudsen of Culbertson rejected the idea of a special session, arguing the governor had the authority under state law to make the $227 million in cuts to balance the budget.

Sales on Thursday argued Bullock should be required to make the cuts before the session ended “to make sure that all the cards are on the table.” The administration said it would order the cuts after the special session adjourns to accommodate any possible shortfall that isn’t addressed by the Legislature.

State agencies have already absorbed $97 million in cuts under a bill authorized by the 2017 Legislature in case state revenues came in lower than the forecast Republicans had accepted.

Health insurance companies

Republicans want to require the nonprofits PacificSource and the Montana Health Co-op to pay the same 2.75 percent premium tax that Blue Cross and Blue Shield of Montana pays.

After two years, in the interest of “tax fairness,” Sales said the tax percentage could be reduced for all three. All three companies offer health care coverage through the Affordable Care Act, although Blue Cross has a different corporate structure.

The GOP also wants to reduce the percentage of the entire budget that the state is required to hold in reserve from 5 percent to 2 percent.

While that would make it much easier to reach a balanced budget, the administration argues it could hurt the state’s bond rating and leave its finances on more precarious footing.

The session

Committee meetings are scheduled to start Monday and run into Tuesday morning, with lawmakers gaveling into session Tuesday afternoon. Lawmakers on both sides have said they hope to finish the session by Thursday.

Montana has had 32 previous special sessions, the last in September 2007 to authorize the governor to pay fire costs. Unexpected fire costs along with lower tax revenues have prompted this year’s special session.

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