Bullock: State spending cuts not needed in response to COVID-19 fallout

Gov. Steve Bullock Wednesday said while the state budget may see a big revenue drop-off this year, because of economic fallout from Covid-19, spending cuts aren’t yet in order.

Montana will enter the 2021 fiscal year this July with a budget balance of nearly $300 million and has another $150 million in a reserve fund and firefighting account – all of which could help cushion the blow of revenue losses, he said.

“Our state finances were in an historically strong position, heading into this pandemic,” he said. “And because of that, we also believe we will come out in a stronger financial position, than most other states.”

In recent weeks, Republican legislative leaders have questioned whether the state should scale back spending, including personnel cuts, to save money in anticipation of revenue dropping off the cliff.

They’ve said that tens of thousands of Montanans losing their jobs and a stay-at-home order and other restrictions on business can’t help but deal a devastating blow to the economy.

House Speaker Greg Hertz, R-Polson, told MTN News that general-fund tax revenue could drop $400 million to $500 million in the next year, setting up the 2021 Legislature with a huge deficit to cover.

“We have a train wreck coming in 2021, and possibly beyond,” he said. “The sooner you start planning for problems in the future, the better off you are. I think any reductions that the governor would make would certainly help during the 2021 session.”

The financial forecasting firm Moody’s Analytics is saying that state tax revenue for Montana in the next fiscal year could drop 15 percent to almost 19 percent. The lower end of that range is about $400 million.

Yet Bullock, a Democrat, said Wednesday it’s too early to make decisions based on what could happen in the coming months, and that by the end of the year, the Legislature will be preparing to come into session.

He also said that cutting the state budget now could cause more harm than good.

“The notion that what we should do is cuts, based on what might happen six months from now or a year from now, I think it’s probably misplaced for a number of reasons,” Bullock said. “Adding to the unemployment rolls doesn’t make a heck of a lot of sense or cutting services that Montanans rely upon doesn’t make a heck of a lot of sense right now.”

State Budget Director Tom Livers also said Wednesday that Congress could approve more aid for the states, to offset budget losses, possibly negating the need for spending cuts.

Budget officials also said Montana is fortunate not to rely on a state sales tax for revenue – a source that’s fallen off dramatically for the states that do. Montana relies primarily on income and, to a lesser extent, property taxes for the bulk of its tax revenue.

Livers said that state officials will have a clearer picture of the budget once they get tax-revenue numbers in the next couple of months. The state delayed payment of state income taxes from April until July, during the Covid-19 pandemic.