Tax cuts, teacher pay boosts, prison expansion shape Gianforte’s budget proposal

Fresh off a reelection win, Republican Gov. Greg Gianforte has proposed that Montana lawmakers adopt a two-year state budget that prioritizes further tax cuts alongside investments in public safety and education. The proposal represents a starting point for budget negotiations that will occur in and out of public view through the 2025 Legislature.

Highlights of the $17.9 billion proposal include a top-bracket rate cut for state income taxes and a homeowner property tax relief provision recommended by the governor’s tax task force. The governor also wants to put $150 million toward expanding the state prison, set up a $250 million public safety initiative, and funnel $100 million into boosting pay for K-12 teachers. Gianforte’s budget would additionally earmark $300 million to shore up the state pension system.

Gianforte and Budget Director Ryan Osmundson summarized the proposal for reporters at a Nov. 13 press conference, but the administration didn’t publish full details until the afternoon of Friday, Nov. 15.

During the press conference, Gianforte cast his proposal as a conservative roadmap for supporting “economic freedom, safe communities, and strong families who have access to opportunities.”

“Our budget prioritizes the health and well-being of our communities and, most importantly, the next generation of Montanans,” Gianforte said. He also described tax cuts as a matter of fairness, saying, “We should do more to help Montanans keep more of what they work so hard to earn.” 

The $17.9 billion in state spending, covering the two-year fiscal biennium that opens next July, equates to about $15,850 per Montana resident.

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About $6.6 billion of that total would come from the state’s flexible-use General Fund, which is funded mostly by income taxes. Other portions of the budget are funded by federal dollars or special-purpose revenues such as hunting license fees.

Gianforte’s proposal plans to leave $555 million in the General Fund when the biennium concludes in June 2027, roughly the same reserve level that’s forecasted for the beginning of the budget period.

The budget proposal comes as the state and national economies have buffeted Montanans with cost-of-living increases, including for childcare, housing, property taxes, groceries and consumer goods. Gianforte, who has blamed inflation on federal policy, easily survived a reelection challenge this year from a Democratic opponent, Ryan Busse, who criticized his handling of cost-of-living issues — property taxes in particular.

The proposal includes several tax cuts, including a “homestead exemption” forwarded by the governor’s property tax task force, which would reduce property taxes on primary residences by raising them on second homes and vacation rentals.

Gianforte’s key tax cut proposals include the following:

• The homestead property tax proposal, which Gianforte said would reduce homeowner taxes by 15%, helping an estimated 215,000 homeowners and 130,000 renters. (MTFP has estimated that the median residential property saw its taxes rise by 21% last year.)
• Reducing the state’s top-bracket income tax rate, which applies to annual individual income exceeding $20,500, and expanding the state’s earned income tax credit, which reduces taxes for low- and moderate-income working families. The governor is calling for reducing the top-bracket rate to 4.9%, down from the current rate of 5.9%. The top-bracket rate was 6.9% when Gianforte took office in 2021.
• Scaling back the state’s business equipment tax, essentially a property tax on equipment like tractors and industrial machinery, by raising the exemption threshold for the tax from $1 million to $3 million. Gianforte said that would exempt about 700 businesses that are currently above the $1 million threshold from paying that tax entirely. Democratic and Republican administrations have repeatedly raised the exemption threshold over the past decade.

On the spending side of the ledger, Gianforte is proposing significant new spending, focused specifically on public safety, education and the state pension system. Some of his spending proposals include:

• $150 million to expand the Montana State Prison, adding about 500 beds in an effort to address overcrowding at the prison and county jails.
• $250 million to fund a public safety commission, similar to the $300 million behavioral health commission established in 2023. 
• $100 million to boost teacher pay, via a mechanism intended to focus particularly on early career educators.
• Funding for three new state district court judges and associated staff in Yellowstone County, as well as a law clerk to help judges in Missoula County.
• Continued funding for the state’s expanded Medicaid program, which provides health coverage for low-income adults. That program is set to sunset in 2025 unless lawmakers choose to renew it in the upcoming session.
• Money to implement the state employee pay plan negotiated with public employee unions. According to the Montana Federation of Public Employees, that pay plan calls for providing most state employees with base pay raises of either $1 per hour or 2.5%, whichever is greater.
• $23 million a year for a “Recruitment and Retention Contingency Fund” for state employees, to be administered by the governor’s budget office. According to a written proposal, that fund would be used to adjust employee base pay to address recruiting and retention challenges that agencies can’t solve with their existing budgets.
• A $300 million infusion into the state pension system. Gianforte said that money will help ensure the pension system is protected from the effects of potential economic downturns.  

“We cannot achieve long-term prosperity without safe communities,” Gianforte said Wednesday. “And at the foundation of a safer and stronger future is our commitment to make public safety a top priority in our budget.” 

Gianforte said his plan did not include any new proposals for expanding childcare capacity across the state — where his administration has classified nearly 60% of Montana’s counties as “childcare deserts.”

The governor’s budget will be subject to review and almost certain amendment as it passes through the Legislature’s budgeting process, which centers around the House Appropriations and Senate Finance and Claims committees.

Incoming Senate President Matt Regier, R-Kalispell, said in a statement that senators expect to hear more from the governor about specific proposals, but that he considers the budget “a great starting point” with “many conservative ideas to build on.”

“The Senate is particularly interested in reforms that provide lasting tax relief for Montanans, restrict state government’s spending of taxpayers’ money, increase public safety in our communities, and protect the Montana way of life for future generations,” Regier said.

Minority-party Democrats indicated their interest in working with the governor to lower property taxes, increase school funding and pass Medicaid renewal. They also criticized the proposed income tax cuts. 

“The Governor has proposed yet another income tax break for the wealthiest Montanans for the third session in a row. It is clear that his focus is not on affordability for working Montanans,” Minority Leader Katie Sullivan, D-Missoula, said in a statement.

Gianforte said he’s looking forward to working with lawmakers through the session, which opens Jan. 6.

“We’ll continue to work together to bring the American dream into greater reach for all Montanans,” he said.