Revenue estimates, tax shifts and property taxes in Legislature

The House Tax Committee depends upon revenue projections from two sources, the Governor’s office and the Legislative Fiscal Division (LFD).

The two entities depend upon outside expertise to provide state, national and international economic trends. In addition, both sources use current and projected tax collections to accurately predict the future. The major funding bill, House Bill 2 was passed in the House three weeks back, but the genesis of the bill goes back to the fall of 2016. Recognizing the elasticity of incoming revenues, political and economic factors; the Tax Committee is tasked with making the best possible guess as we move to the end of the session and finality of our budget process. There is a $100 million difference in the estimates. Siding with the high end might allow for some backfilling of numerous reductions in agencies or the feasibility of several business and consumer tax credits passed by the body. A mistake (siding with too much revenue), might trigger a special session to reduce spending. Both entities provide expertise with the major difference being the political independence of the LFD. The biennium general budget will be more than $10 billion, so you might say, we are down to the last 1 percent of the budget. The budget must have an ending fund balance of about $112 million with the desire for a rainy day fund between $200 million and $300 million.

Last week I was approached by an official in the Office of Public Instruction (OPI), relaying to me that funding had been restored to portions of our K-12 budget. This is both good news and worrisome news. I received the second-hand news from the press (missing from the conversation), that the restoration involves a substantial tax shift from state funding to mandatory local funding. Such a tax shift has somewhat proportion effects upon school districts based upon taxable values of the district and the impact on individual property owners. Generally, large tax shifts like this, are poor public policy.

Senator Keith Regier, myself and the Department of Revenue are still working on Senate Bill 94, a bill to reduce property taxes for people adversely effected by residential appraisals. The bill passed the Senate and is now in the House. The amendments will be before House Tax this week and contain income eligibility requirements for a reduced tax rate. Amendments are aimed at making the statute changes legally defensible and address some equity issues.

Democrat Dave Fern represents House District 5 in the Montana Legislature.