State could lose “any, all or none” of $7.5 billion federal special revenue authority if ‘sex’ definition is enacted

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A deep-dive fiscal note requested by legislative Democrats and distributed Friday says Montana could lose “any, all or none” of its $7.5 billion federal special revenue authority — federal grants, in other words — if Senate Bill 458, legislation to define “sex” in Montana law, is enacted. 

The bill, sponsored by Sen. Carl Glimm, R-Kila, inserts a definition of sex based on a person’s reproductive characteristics into more than 40 sections of state code — necessary, Glimm says, in order to clear up confusion between “sex” and “gender” in statute. 

But critics of the bill say it will effectively eliminate legal recognition in the state of transgender, nonbinary and intersex people, branding it as another attempt to restrict the expression of LGBGT+ people in Montana. Outside of the policy itself, opponents of the bill have also warned that its wide-reaching nature could generate a substantial logistical cost for the state as well as jeopardize federal funding due to potential conflicts with anti-discrimination laws. 

The original fiscal note listed a $0 cost to the state, though technical notes from the Montana University System and the state Department of Corrections warned that possible non-compliance with federal law could cost the state a substantial sum in legal fees. The bill passed the Senate shortly after the transmittal break and now awaits a committee hearing in the House. 

In light of that $0 price tag, Democrats last week asked for a new fiscal note — this time from legislative fiscal analysts, rather than the governor’s budget office, which generally conducts fiscal analysis of proposed legislation. Their request specifically sought to quantify how much federal money could be on the line if the warnings of opponents come true. They did not ask the Legislative Fiscal Division to estimate potential legal expenses.

“The original fiscal note in my mind just raised questions about what the actual fiscal implications were,” Senate Minority Leader Pat Flowers, D-Bozeman, said in a press conference Friday. 

The new note still leaves some big questions unanswered. The fiscal division, in concert with legislative staff attorneys, determined that whatever risk to federal funding exists, the cost would depend on how the state implements the bill if passed — hence the “any, all or none” language.

The total amount of federal special revenue funds appropriated in the 2023 fiscal year is $7.5 billion, compared to about $4 billion in actual funding the previous year. 

“In addition, federal revenue authority received by the Montana University System directly from the federal government may be impacted depending on how the universities choose to implement SB 458 if it were to pass,” the note says.

In the 2022 fiscal year, that sum was about $312.5 million. 

The new fiscal estimate comes with a substantial footnote laying out case law and uncertainty about how the bill would be implemented.

The basic conflict is this: “The definitions provided in SB 458 do not appear to have any impact on the inclusion of sexual orientation under the protected class of sex, but may be an issue when considering gender identity since the definitions rely on biological and reproductive elements of a human being rather than an individual’s subjective identity as any gender,” the note states. “Therefore, under the SB 458 definitions, a transgender individual may be required to only identify as either male or female based on biology, rather than their preferred gender under Montana statutes that use the words ‘sex,’ ‘male,’ or ‘female.’”

And, as the other half of the equation: “Federal laws and contracts often require a state’s compliance with non-discrimination laws as a condition of federal funding.” 

Under the U.S. Supreme Court’s 2020 ruling in Bostock v. Clayton County, a Georgia discrimination case involving a gay county employee, the 1964 Civil Rights Act protects employees from discrimination based on their identity as gay or transgender. Federal agencies have been directed to “apply the same interpretation to other federal laws that prohibit sex discrimination, such as Title IX,” the note says — but that’s new under the Biden administration. 

That said, the bill doesn’t direct agencies how to implement the new definition of sex. There’s nothing to say that state government definitively will implement the bill in a way that violates a person’s right to employment under federal discrimination law, the note reads.

Under statute, state employers should already not be using sex as a determining factor when hiring. 

“On the other hand,” the note says, “an argument can be made that defining male and female to the exclusion of a transgender individual may then allow a state or local governmental entity to use that characteristic to discriminate.

“Furthermore, considering that the terms are currently used in Montana code, yet undefined and presumably understood by state agencies in regular operation, it is uncertain in what way these definitions will impact or change the way state agencies operate,” the note continues. “Therefore, much like the issue for the federal laws, the supervision by the governor over the executive branch will dictate to what extent these definitions are applied and used for day-to-day operations.”