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Montana budget strong, but tax hikes on the table

August 12, 2020 GMT

HELENA, Mont. (AP) — Montana’s general fund balance is high enough to cover any coronavirus-related revenue losses in the coming fiscal year, state financial analysts said Wednesday, but the budget deficit could grow to over $250 million by 2023.

The state’s revenues in Fiscal Year 2021 are predicted to be $300 million less than estimated in 2019, when the Montana legislature last met. But the general fund balance is estimated at $452 million, which is enough to cover the decreased revenues.

However, analysts predict that the state’s expenditures will continue to be higher than its revenues through 2023, leading to a projected $253 million shortfall.

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Montana law requires a balanced state budget. The Democratic chair of the Legislative Finance Committee suggested potential tax increases Wednesday, while a Republican leader said he favored spending cuts.

Rep. Kimberly Dudik, D-Missoula, proposed numerous possible tax increases to offset future budget shortfalls.

The options she proposed, which could be up for discussion during the legislative session that is scheduled to begin in January, include implementing optional local sales taxes, increasing income taxes for those in higher income brackets and raising property taxes for those who do not use their Montana home as their primary residence.

Increasing income taxes for those making more than $400,000 a year would affect less than 1% of Montana residents and could raise $44 million per year, Dudik said.

Other options presented by Dudik included increasing the electrical energy tax, which hasn’t been raised since 1977, and increasing the beer tax, which hasn’t been raised since 1987. Some legislators raised concern that these tax increases could result in higher prices for consumers.

House Speaker Greg Hertz, R-Polson, proposed reducing state expenditures to balance the budget.

“There’s a number of us in the legislature who don’t believe this is a time to raise taxes on anyone in Montana,” he said. “Instead of looking at possible tax increases during these uncertain times, I think we really need to focus, just like all Montanans are, on reducing our expenditures.”

The Republicans who hold majorities in the House and Senate previously called for immediate cuts to the state’s budget when the pandemic began. But Gov. Steve Bullock, a Democrat, has rejected their proposals.

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Iris Samuels is a corps member for the Associated Press/Report for America Statehouse News Initiative. Report for America is a nonprofit national service program that places journalists in local newsrooms to report on undercovered issues.