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January 20, 2023
If, in the world of western American politics, whiskey is for drinking and water is for fighting, what purpose does an (at least) $2.4 billion budget surplus serve?
Lawmakers this session are eager to figure that out. Dealing with the surplus, in part the result of tax collections buoyed by major federal aid packages during the COVID-19 pandemic, is arguably the 2023 Legislature’s biggest priority.
But that goal is complicated by numerous competing visions for the money — not only between Democrats and Republicans, but between the House and Senate, between lawmakers and Gov. Greg Gianforte, and between discrete Republican caucuses. And as a whole, the supermajority Republican caucus has expressed willingness to break with the governor’s office on budget priorities, to the chagrin of the administration on at least one occasion.
Of course, the state also has serious needs: anemic Medicaid provider rates, struggling state-run institutions and more. How much money is invested, rather than mailed back to taxpayers, is a key question.
There’s general agreement on giving property tax rebates to Montana residents who have seen their costs of living skyrocket, but how much and to whom is up for debate. So too is the possibility of income tax rebates, a popular idea among some Republicans, but one not represented in Gianforte’s budget proposal, or some kind of relief to renters, an idea advanced by Democrats.
“It’s just 150 people and one executive — the old magic thing I always say is 26, 51 and 1 — trying to fit into what sort of an initial tranche of bills might please folks,” Republican Rep. Llew Jones, the House Appropriations Committee chair, told Capitolized this week.
He described three basic GOP factions at the Capitol: those who want to prioritize property tax rebates, those who want to prioritize income tax rebates, and those who feel any rebate “is not thoughtful” and would prefer investing in the state’s needs or establishing a trust fund, for example.
“We’re going to see if we can’t come up with the packet that has everyone somewhat happy and somewhat unhappy,” Jones said. “Because I guarantee you for some it won’t be big enough. For some it’ll be too big an income tax, too small an income tax. Too much, too little.”
In the House, at least, six GOP-backed budget bills — aside from major budget measures like House Bill 2 — are in the pipeline, Speaker Matt Regier, R-Kalispell, told reporters during his weekly press availability Tuesday.
Those six are not an exhaustive count — there are additional bills that reflect ongoing tax cuts — but nevertheless include income tax rebates, property tax rebates, a Gianforte-backed increased exemption to the business equipment tax, $185 million to pay down state debts, a highway infrastructure bill and an adjustment to the capital gains tax.
Two of the bills in particular show the interplay between the income and property tax rebate crowds: House Bill 192, a wide-ranging bill that includes income and property tax rebates from Rep. Bill Mercer, R-Billings, and House Bill 222, a property tax rebate from Rep. Tom Welch, R-Dillon.
Regier said the House GOP has reached a general — though liable to change — agreement with the Senate and the executive branch that would see all the language in Mercer’s bill struck save for the income tax rebate. That agreement has yet to be reflected in any amendments to the bills. Under the proposal, the state would issue about $450 million in one-time-only income tax rebates.
Property tax rebates would then live in the Gianforte-backed House Bill 222. That bill originally called for up to $2,000 in rebates for eligible taxpayers over the next two years, but an amendment in the House Taxation Committee halved that amount. Whether it remains that way is difficult to say, as the governor’s office has expressed consternation that lawmakers from Gianforte’s own party would want to reduce the amount of property tax rebates.
Last week, Gianforte senior adviser Travis Hall tweeted a GIF from “The Twilight Zone” with the caption: “All 14 Republicans on #mtleg House Tax Committee today voted to slash property tax rebates for Montana homeowners from $2,000 to only $1,000.”
“The executive has its point of view. The Legislature has its point of view,” Jones said. “And usually both sides will come together in time.”
Another proposal waiting in the wings could further complicate matters. Members of the newly created Montana Freedom Caucus are backing a bill from Rep. Jerry Schillinger, R-Circle, that would offer $1 billion in income tax rebates and $275 million in property tax rebates.
Despite the standing arrangement with his own tax bill, Mercer is among the co-sponsors of Schillinger’s plan. He said he feels the state should maximize the income tax rebate under the logic that it was income tax payers that mostly contributed to the surplus, and that property taxes are mostly the purview of local governments and special districts anyhow.
He said he hopes the Legislature and governor’s office can find consensus on a diverse tax rebate program.
Jones said the fundamental difference between the income and property tax rebate groups comes down to the source of the state’s surplus.
“I would argue that there’s a lot of folks that are saying the source of this money wasn’t the property tax system, it was the rebate tax system, and thus the rebate should be more correlated with income tax,” Jones said. “The opposite side of that is, while the income tax might have been the source, the person that was potentially harmed in this system was the market value explosion that occurred due to all the income on the ground, and thus there are property tax payers out there that had a lot of expense visited upon them.”
The tax bills are now all making their way to the House Appropriations Committee, where the real negotiations will occur.
“In the end in this sausage-making process, it was felt that if we could gather them all in one spot, we could hopefully debate out our differences and arrive at what might be the best packet that reflects the people of Montana,” Jones said.
In the meantime, other state priorities are languishing in the Appropriations Committee while lawmakers hash out their plans for the surplus. Those include House Bill 13, a pay raise for state employees, which has been awaiting a committee vote since the second day of the session. The delay has generated some concern among the Montana Federation of Public Employees, union President Amanda Curtis told Capitolized this week.
Regier said he’s heard lawmakers say they don’t want to pass the pay plan until they pass the rebates.
“Yeah, I’ve heard that a lot,” he told Capitolized. “We need to take care of the taxpayers first, they’re the ones that overpaid, we’ve got the surplus, let’s take care of them. And then after that we can deal with the whole operation of government, which includes the pay plan.”
The Legislature’s newest member is Rep. Naarah Hastings, R-Billings, whom the Yellowstone County Board of Commissioners selected this week to replace former Republican Rep. Mallerie Stromswold.
Stromswold resigned earlier this month, citing her mental health and an at times hostile Republican caucus. Her resignation left an open seat in House District 50, setting into motion the complicated vacancy process laid out in statute.
The Yellowstone County Republican Central Committee advanced three candidates to the county commissioners last week: Hastings, former county commissioner Denis Pitman, and attorney Anthony Nicastro. As Stromswold was a Republican, so too were all the candidates to replace her.
Hastings, the eventual pick, is a transplant from Washington state who owns a doughnut shop in Billings and founded a talent acquisition company. Her LinkedIn page notes that she’s also a Brazilian jiu-jitsu athlete.
“We’re glad to have a full family,” House Speaker Matt Regier, R-Kalispell, told reporters Tuesday morning in introducing Hastings.
Aside from Stromswold, the Legislature has been riddled with vacancies over the last few weeks. Sen. Terry Gauthier, R-Helena, resigned to go on a globe-trotting motorcycle trip — his seat was filled by now-Sen. Becky Beard, R-Elliston. Beard’s departure from the House to take Gauthier’s place left her House seat open — that seat was filled by Rep. Zack Wirth, R-Wolf Creek. Meanwhile, Rep. Douglas Flament, R-Lewistown, himself a vacancy filler, resigned due to health problems. He was replaced by Rep. Ed Butcher, R-Winifred.
- House Bill 181 passed out of the House Education Committee on a party-line vote Monday, Jan. 23. The bill, sponsored by Rep. Linda Reksten, R-Polson, seeks to eliminate a requirement that the elected state superintendent of public instruction hold a bachelor’s degree from a Montana university. It initially did so by striking any reference to academic bona fides in state law but, by virtue of an amendment, now calls for a degree from an accredited institution.
- Senate Bill 94 passed the Senate Judiciary Committee Tuesday, Jan. 24, with only two dissenting votes and minimal amendments. Conceived by the Criminal Justice Oversight Council and sponsored by Sen. Barry Usher, R-Laurel, the bill would require addiction recovery residences to register with the state health department and incentivize operators to gain certification from a recognized industry accreditation group. An amendment to exempt religiously affiliated organizations from the requirements, requested by Sen. Daniel Emrich, R-Great Falls, failed to pass as drafted.
See MTFP’s Capitol Tracker guide for updates on other bills.
EYE IN THE CAPITOL
Montana hunters and anglers mingle at an “Elk Camp at the Capitol”event on Tuesday, Jan. 24, hosted by the Montana Citizens’ Elk Management Coalition.
Heard in the Halls
“In my job, I’m an attorney, and I simply expect to get sued all the time.”
—Montana Deputy Solicitor General Brent Mead during a Jan. 23 hearing on Senate Bill 153, which would repeal changes to the state’s ballot initiative process enacted by the 2021 Legislature.
Gianforte budget proposal puts state surplus toward tax cuts, infrastructure and Montana State Hospital: Read more about the governor’s budget proposal, and what it would do for the state’s suffering health care infrastructure. (MTFP)
Lawmakers take up state employee pay plan aimed at addressing turnover, vacancies: Read more about the proposal to increase state employee pay, the result of lengthy negotiations between the Gianforte administration, public employees and their union representation. (Helena Independent Record)
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