Bipartisan support to protect state's 'rainy day' account

HELENA ­— As the 2017 legislative session enters its final days, the still-unresolved biennial budget and a proposed infrastructure package are creating growing friction between the Republican-controlled Legislature and Democratic Gov. Steve Bullock’s office.

Yet a proposal that would reshape how the state’s bank account responds to the unexpected may be gaining bipartisan traction, with a committee of lawmakers hoping to hash out a final version in the coming days.

Senate Bill 261 was introduced by Sen. Llew Jones of Conrad, one of the Republicans’ top budget negotiators in the Senate. It would create a “budget stabilization reserve fund” to act as a backup savings account for the state, while putting a system of triggers in place to reduce spending if state revenues suddenly decline.

Jones said his proposal grew out of the fiscal climate that legislators returned to at the beginning of the session, with the general fund ending balance, or “rainy day fund,” depleted by an unexpected drop in cash from taxes on income and fossil fuels.

When the previous Legislature left town in 2015, the two-year budget predicted a $350 million cushion in the state’s general fund. But the downturn in natural resource revenue instead left less than $100 million in the bank, and lawmakers have devoted much of this session to carving up a smaller-than-expected fiscal pie.

“Neither the executive nor the Legislature can accurately predict what’s going to happen for revenue forever,” Jones said. “Recessions are surprise events, and we know there will be another recession, and it could possibly start tomorrow.”

“We needed a system that was able to react quicker to revenue shortfalls and include a series of triggers and responses so that we could do a better job of long-term fiscal management for Montana,” Jones said in an interview Wednesday.

State law currently requires the governor to reduce spending if revenue projections fall below certain levels. Under Jones’ plan, earlier triggers would automatically enact across-the-board spending cuts in state government. The sharper the economic downturn, the sharper the cuts would become.

Jones compared it to a person making $1,000 per month suddenly finding themselves with only $750 in monthly income.

They can either bring monthly expenses below $750, he said, “or you can keep spending as if you were making $1,000 a month, and then one day when your savings runs out and you haven’t found a cheaper place to rent, you haven’t found a way to lower car payments, suddenly you recognize your back is against a wall and you’re making drastic decisions.”

Had his system been in place before last year’s revenue drop, Jones believes that proposed budget cuts to state programs wouldn’t have been nearly as deep this session.

“Cuts would have begun to occur earlier. Stuff that’s now been slammed down hard could have been cut earlier,” he said. “You can save a lot of money if you have time.”

While the budget and infrastructure appear once again mired in last-minute negotiations, Jones’s proposal has been picking up bipartisan steam.

Dan Villa, the governor’s budget director, had initially expressed skepticism with the proposal, and an earlier version passed the Senate with scant Democratic support. But it received bipartisan approval in the House Wednesday, passing 76-23, and Bullock said during a press conference Thursday that he is working with the sponsor to find a workable compromise.

“I’ve spent a lot of time speaking directly, me and Senator Jones, about the idea of having a budget stabilization reserve fund, or a statutory rainy day fund, and I think that that has merit,” Bullock said.

He added that he wants to ensure enough flexibility under the measure “so that if I have to rely on that as part of making sure that Montana maintains both its fiscal rating and our flexibility, as Montanans expect, … I won’t have to be calling the Legislature back in shortly into the new fiscal year.”

On Friday, Senate Minority Leader Jon Sesso, D-Butte, also indicated that the two parties were nearing a consensus on the stabilization-fund plan. But, he added, those discussions are intertwined with the larger debate over the Legislature’s two-year spending plan, most of which resides in House Bill 2.

The Senate voted Thursday to reject changes added into the bill by the House, meaning it will head to a conference committee composed of two Republicans and one Democrat from each chamber.

A compromise version would have to again pass through both chambers before reaching the governor’s desk.

Reporter Sam Wilson can be reached at 758-4407 or by email at swilson@dailyinterlake.com.