The budget debate ends
The debate over the budget took center stage as the Republicans and the Democrats squared off over how to fund the $8.1 billion House Bill 2 and how to spend the $820 million House Bill 645, also known as the Federal stimulus bill. The Republicans wanted a balanced budget by ensuring expenditures equal revenues and keeping a minimum of $250 million in the ending fund balance. The Republicans justified their position by pointing to the almost $1 billion drop in the ending fund balance from a year ago and an estimated $130 million reduction in this year's tax receipts.
The Democrats viewed the existing $250 million ending fund balance as "money under the mattress" and were less concerned about balance as they were about funding the new initiatives. The Democrats justified their position by pointing to a 70 percent voter approved increase for Healthy Kids and a rising demand for public services in tough times.
As the two sides clashed and vied for public support, a compromise was reached that addressed the two largest issues: Education and Healthy Kids.
The issue concerning education was how to fund an inflationary increase of 3 percent. The Republican controlled Senate funded the first 1 percent through general fund dollars and used Federal stimulus dollars to fund the remaining 2 percent. While the net amount is the same, using stimulus dollars reduced future base spending obligations. The Democrats wanted the full 3 percent increase added to the base budget and sought an additional $10 million in funding for "at risk" students. The compromise was reached by funding 1 percent in the first year and about 2 percent in the second year. Combined with the Federal stimulus dollars, education funding increased by about $161 million.
The second issue was how fund the Children's Insurance Program (CHIP) or what is commonly known as Healthy Kids. As many may recall, the voter initiative authorized an increase in coverage from the current 175 percent to 250 percent of poverty. To be clear, the initiative was funded by diverting a portion of the insurance premium tax that was previous going to general fund. In effect, funds that paid for other programs, such as education, were diverted to pay for Healthy Kids. Without additional revenue, the choice becomes cutting existing programs or raising taxes.
The Republican plan limited the increase in coverage 200 percent of poverty. At 200 percent of poverty, a family with four children making around $57,000 a year would be eligible. This change would add 15,000 eligible children at a cost of about $11 million.
The Democrat position was to fully fund CHIP to 250 percent of poverty which would mean a family with four children making around $66,000 would be eligible. To put it into perspective, the average income for a family of four in Montana is about $56,000. Even with Federal matching dollars, the state's share would be in excess of $22 million. The compromise was to leave the 250 percent of poverty in statute but limit the additional funding to about 11 million dollars. The net effect of the compromise is that more kids will be eligible for roughly equivalent to 200 percent of poverty level but allows for additional flexibility should additional funding become available.
The bottom line is that the Senate funded both education and Healthy Kids to the extent that we could pay for without raising taxes. Montana families have had to tighten their belts and the same should be true of our government. House Bill 2 budget grows government 1.6 percent compared with 41 percent during the last four years. The $250 million ending fund balance provides a small surplus when faced with plunging revenues as a result of falling oil and commodity prices, declining payroll, and weak corporate profits. In times of economic uncertainty, living within our means is both prudent and responsible. The last thing we need during these tough times is raise taxes. Our priority remains jobs.
Sens. Ryan Zinke, Bruce Tutvedt and Verdell Jackson are members of the Montana Senate.