HELENA — As a handful of Republican and Democratic legislative leaders met with Gov. Steve Bullock to discuss his handling of the state budget during the COVID-19 pandemic June 11, they came to quick agreement on at least one point: While it seems likely the pandemic’s economic fallout will cause a budget crunch by dragging down state income tax collections, nobody yet knows with any certainty how hard the squeeze will be.
“We all know revenue is going down,” said Speaker of the House Greg Hertz, R-Polson, “we just don’t know how much and how fast and how long.”
Without solid budget projections in hand, the state’s top political leaders have fallen back to partisan camps. Republicans, pessimistic about how long the economic crisis will last, want the governor to take aggressive action to rein in state spending. Bullock and other Democrats are bullish on the prospect of a quick recovery or a federal bailout for states, and consider immediate cuts unnecessary.
Hertz, in attendance Thursday with Senate President Scott Sales of Bozeman, was one of several GOP leaders who signed an April letter urging Bullock to limit COVID-19’s fallout by acting quickly to reopen Montana’s economy. The April letter also urged the governor to furlough state employees to help maintain the state’s cash reserves.
In the weeks since, Bullock has directed the state into a phased process that has stores and restaurants open for business even as state health officials report a handful of new COVID-19 cases daily. He has also pointed to the hundreds of millions of dollars stashed away in the state’s reserve accounts, saying Montana is well positioned to weather a budget storm.
“Our general fund cash flow is manageable, state agencies are implementing some belt-tightening measures, and I think it would be actually fiscally irresponsible to make cuts now,” Bullock said Thursday.
Even so, Republicans argue that more substantial cuts in the short-term could shore up the state budget for the long run, including after Bullock hands the governor’s office over to his yet-to-be-elected successor at the beginning of next year. Hertz, for example, suggested a 5% spending cut, saying that might be possible without laying off state employees.
“I think we’re in for a long, hard slog coming out of this thing,” Sales said. “We should err on the side of caution and start reducing costs.”
Hertz also argued that Montana’s economy tends to recover from downturns more slowly than the rest of the nation.
Senate Minority Leader Jon Sesso, a Butte Democrat who sat in on Thursday’s meeting, countered that he thinks the COVID crunch will likely yield to a quick recovery once the threat of the virus passes.
“This is a health emergency economic crisis, not a fundamentals of the economy crisis,” Sesso said.
Complicating the picture is uncertainty over whether the U.S. Congress will come to the aid of Montana and other state governments. The March Coronavirus Aid, Relief, and Economic Security, or CARES, Act has already provided Montana with a $1.25 billion coronavirus relief fund, but that money is designated for unbudgeted spending in response to the crisis, not backfilling the state budget if expected revenues fall short.
Congress could pass another relief package to help states balance their budgets, or rework the CARES Act rules to let states use that money to shore up their finances. Even so, Hertz said, he’s pessimistic that additional relief legislation is likely to get through Congress in an election year.
Bullock is more optimistic.
“Candidly, there are a whole lot of Republican-led states in a whole lot worse positions than ours that need to make sure something happens,” he said.