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Gov. Steve Bullock on Thursday pitched a substantial investment in preschool, as well as fully paying for Medicaid expansion and an infrastructure package for urban and rural parts of the state in his two-year budget proposal.

The budget will spend close to $10.3 billion, including state and federal money, a slight increase over the last budget. It predicts modest growth in the amount of money Montana brings in through taxes, about 3 percent in the first year of the budget and nearly 4 percent in the second year.

It also puts aside $303 million for the state's rainy day fund.

To help boost revenues, Bullock has proposed about $100 million in new tax increases, many of which were shot down in the 2017 Legislature. That includes increases to the tobacco tax, the liquor tax and taxes on hotels and rental cars.

Republicans in the state House and Senate said Thursday new tax proposals are generally a non-starter in their caucus and that the state already has enough expected revenue to pay for the services it should provide.

The biggest battle in the 2019 legislative session, which will run from January to the end of April, is expected to focus on Medicaid expansion. Bullock and lawmakers dipped their toes into that debate Thursday with the budget proposal.

Bullock wants to pay for the state's share of expansion with revenue from the general fund. The program costs the state about $57.4 million a year, though costs are offset by about $28.4 million in savings.

In 2015, a coalition of Democrats and more moderate Republicans in the Legislature approved an expanded Medicaid program that covered people earning up to 138 percent of the federal poverty level.

That original bill called for expansion to sunset in 2019, leaving it up to the 2019 Legislature to decide to either continue, alter or end the program.

Bullock said since expansion passed, nearly 100,000 Montanans have gained coverage, and hospitals have seen a decrease in uncompensated care costs. He highlighted that no rural hospitals in the state have closed since 2015, while states that didn't expand Medicaid have lost facilities. He also cited a handful of studies that have shown expansion brought an economic benefit to the state.

"Montana can’t afford to lose all that progress,” Bullock said.

But Republicans see the program, which has covered more than twice the number of people initially projected, as a financial burden for Montana.

Senate President Scott Sales, a Republican from Bozeman, said while some Republicans want to see expansion continue and others do not, he thinks for any form of the program to move forward there needs to be asset and means testing for recipients, as well as a work requirement and possibly drug testing.

In the midterm election last week, Montana voters rejected a proposal by ballot initiative to raise the tobacco tax to pay for Medicaid expansion and make the program permanent. Bullock and Republicans each took away a different message from that outcome.

Bullock said out-of-state tobacco companies spent more than $17 million to defeat the initiative, or more than was spent by both sides in his last governor's race. All that money, he argues, spoke louder than Montanans' desires for health care coverage.

"I don't look look at it as mandate of saying tobacco shouldn't pay for its fair share or that anybody wants to roll back the gains we have made in our state as a result of working together," Bullock said.

But Republican leadership views the vote as a directive from Montanans that they don't want Medicaid expansion or to pay for it through a tobacco tax.

"The public just turned down Medicaid expansion and the tax that would have helped pay for it," said Senate Majority Leader Fred Thomas, a Republican from Stevensville. "To propose [that is] just snubbing the public immediately after two weeks ago they said no."

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Aside from Medicaid expansion, one of the largest pieces of Bullock's budget proposal is a $30 million investment in preschool. That includes nearly $20 million to implement a voluntarily public preschool program.

In the last budget he'll propose as governor before being termed out in 2020, Bullock cast an eye toward legacy, saying a robust public education system will boost the state for generations to come.

The governor has long called for an expansion of Montana's education options for preschool-age children. The 2017 session gave the governor a bit of what he wanted, with $6 million for programs around the state.

The budget also includes a freeze on tuition at public universities.

In addition, a $290 million infrastructure package in the budget would pay for projects with a mix of cash and bonding. Infrastructure has been a thorny topic in the Legislature. Bills did not pass in the House in 2011, 2015 and 2017. And in 2013, Bullock vetoed a bill that made it through.

The package includes a $44 million grant program for areas of the state most affected by the Bakken oil boom, which brought in money to the state but also a population boom and increased traffic that battered roads and other infrastructure in northeastern Montana.

Bullock's budget predicts revenue growth in the first year of nearly 3 percent, and nearly 4 percent in the second year. Republicans said that's similar to their revenue projections, which will be released Monday.

The 2017 legislative session, and following special session called to address a predicted revenue shortfall, were marked by a battle over the amount of revenue lawmakers and the governor’s office predicted.

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