Elsie Arntzen, Montana Superintendent of Public Instruction

Elsie Arntzen, Montana Superintendent of Public Instruction

Thom Bridge, thom.bridge@helenair.com

Montana Republicans will likely propose adjusting school payments to even them out across the year, avoiding a spike in payments like the one coming in November. 

Legislators will convene Monday after Gov. Steve Bullock called a special session to address budget woes. 

November's $125 million payment was called into question by budget director Dan Villa in October when he noted the state's general fund had only $87 million. The payment is significantly higher than most school payments, as is a payment in May.

But about a week later, Villa told educators at a conference in Billings that the payment would be made, according to Dennis Parman, the director of the Montana Rural Education Association. 

"When he said it, the first thought I had was, 'Sure, you can say that,'" Parman said, assuming Villa was banking on a special session that would help balance payments or free up additional revenue. 

Superintendent of Public Instruction Elsie Arntzen criticized Bullock for bringing the payment into play in a press release issued last week, citing an analysis from the non-partisan Legislative Fiscal Division that said the payment could be made even if there wasn't enough money in the general fund. 

If cash is short, the state can dip into other state funds to fill gaps. The analysis cites up to $13.7 billion available, with about $633 million most easily accessible. The state could face a $37 million shortfall for the November payment, according to the analysis. 

Analysts from credit rating agencies S&P and Fitch said that such a move likely would not have a negative effect on the state's rating. 

"Sure, we keep an eye on it," said Doug Offerman, Fitch's primary analyst for Montana. "We don't think that, at least in Montana's case, it's a problem."

Larger structural problems, like projections that overall revenue won't be able to meet expenses, can have a negative effect. But states also get a long leash from ratings agencies. 

"We also assume that a state will figure out how to correct it," Offerman said.

Problems cropped up soon after Bullock signed the legislature-crafted budget in May, as revenue estimates came up short of projections. A round of automatic cuts built into the budget were triggered, but they weren't enough to keep pace with low revenue. 

Payments

Arntzen proposed spreading the Guaranteed Tax Base Payment, which is usually doled out in November and May, across an additional two months. A press release from her office said the move would free up about $70 million to immediately deal with revenue shortfalls. It would not affect overall revenue for the biennium.

The higher payments are "a somewhat recurring issue," said Arntzen spokesman Dylan Klapmeier, calling adjustments "a good long-term solution."

He said that Arntzen had been in touch with legislators about the proposal. Republican Rep. Jeff Essmann said he floated a similar idea last week. He framed budget problems as a short-term issue.

“The $37 million cash flow problem needs to be dealt with,” he said. 

Republican legislators expanded the scope of the agenda Friday to include proposals to allow additional fund transfers.

Offerman said states frequently see cash flow issues in November or December. 

When asked about Villa's confirmation that payments would be made, Bullock spokeswoman Ronja Abel said via email "the cuts proposed by the Governor (Monday) enable us to make the payment."

She referred to $76.6 million in budget cuts under a law that allows Bullock to cut budgets of state agencies up to 10 percent, which she said fills a projected shortfall for November. Most school payments are shielded from the cuts.

An additional $76 million in proposed cuts that would require legislative approval would help maintain a balanced budget at the end of the biennium, she said. Included in that pool is a proposed $11.6 million cut to school block grants. Schools could direct the grant money toward multiple accounts. 

A collection of education groups, including MREA, the state teacher's union and the state school board association, announced their support for Bullock's proposed school cuts Friday. 

At the same conference Villa attended, Parman warned educators that a special session could undo the laws that shielded most school payments from cuts Bullock can make automatically.

Parman later cited the $11.6 million block grant cut proposal as an example. The move requires legislative approval because of how the grant is funded. The cuts would affect only the next school year, as laid out on Bullock's proposal.

It's unclear if the move would affect the school funding formula going forward. 

"That's a big unanswered question," Parman said.

He advocated for either resuming the grants in the future or increasing another funding stream to compensate. 

Klapmeier, the Arntzen spokesman, said she opposes the block grant reductions. 

The effects of another school proposal — which Bullock's estimates say could save $8.2 million — are somewhat unclear. According to Office of Public Instruction fiscal analysts, the School Facility and Technology Account receives revenue from river bed rents and timber sale. The money was split between programs that help school districts pay interest on bonds and chipped in for schools' emergency infrastructure repairs. 

"Last year, the companies paying river bed rents entered into a sort of tax protest that resulted in no funds coming through to OPI to distribute to schools," said Klapmeier in an email. "We have been telling schools not to expect any funds in this biennium."

One of the programs was ended by the legislature during the spring session, and an unspent $3.8 million was pushed into the next biennium. Combined with forecast revenue during the next two years, the figure reached $8.2 million — money which would be transferred into the general fund to help fill revenue gaps instead of being earmarked for schools.

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