Use surplus to reduce liabilities and encourage investment

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In response to the Covid-19 pandemic, the federal government has poured $14.5 billion into Montana’s economy over the past two years. The sheer magnitude of this temporary economic stimulus has boosted income tax revenues, despite the reduction in tax rates enacted in the last legislative session. The state is expected to have a budget surplus of more than $1 billion this year.

Some are advocating for an immediate special session of the Legislative Assembly to “repay” dollars to taxpayers in a manner reminiscent of recent inflationary spending by the federal government.

Before giving in to this impulse, we should carefully assess what other less inflationary options exist to return this money to taxpayers and what uncertainties face the state.

First, consider the long-term implications of the federal Covid-19 stimulus package:

• Future generations are now burdened with the largest national debt of all time.

• Inflation has reached its highest level in 40 years with no end in sight.

• The Federal Reserve has raised interest rates.

• We seem to be entering a recession with a real possibility of 1970s-style stagflation.

A second-order effect of the pandemic is a spike in residential property values ​​largely due to outside buyers. This has created anxiety among property taxpayers, especially homeowners.

Finally, the impact of inflation on the delivery of government services is significant and not in sight. For example, the state is in dire need of snow plow drivers, nurses, prison guards, etc.

What should the Montana Legislature do about the current budget surplus? The excess should be returned to taxpayers, but not through an inflationary direct refund, but rather by reducing our current liabilities and focusing on investments that reduce future expenses. Here are some possibilities:

• Mitigating the explosion in market value through a temporary reduction in property taxes combined with permanent measures to control the growth of property taxes.

• Address the Hot Spring mental health crisis by investing in a regional mental health model that would deliver better outcomes while reducing ongoing liabilities by up to $50 million per year.

• Collect approximately $225 million in Montana debt or bond liabilities to eliminate the need for future debt service payments.

• Prepare for future fire seasons by replenishing the state fire fund.

• Replenish the Governor’s emergency fund in anticipation of other disasters such as the recent flooding in southern Montana.

• Maintain adequate state reserves to ensure that services are not interrupted in the event of a recession. Everyone expects police protection, paved and snow-cleared roads and fully staffed jails.

The Legislative Assembly has an opportunity to work with Governor Gianforte to make structural changes that will produce long-term benefits for taxpayers while ensuring the delivery of essential services. This will require a thorough assessment of the governor’s budget (to be released late this fall) and carefully crafted legislation that is carefully reviewed by standing committees with meaningful public input.

The appropriate venue for such deliberate action is the upcoming regular legislative session, not the hothouse environment of a special session.

Representative Llew Jones, R-Conrad

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