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HELENA - The state's general fund budget will be in the red by mid-2011, a new revenue forecast predicted Monday.

The Montana Legislature's chief revenue forecaster, Terry Johnson, estimated the state would face a $62.5 million general fund budget deficit by June 30, 2011, as tax collections continue to fall.

It marks the first time that a forecast from either the legislative or executive branches has predicted that the state would face a budget deficit by the end of this two-year budget period.

Johnson's latest monthly forecast traced the continuing deterioration in the state's actual and projected tax collections and how the expected general fund surplus will melt away by June 30, 2011.

When legislators adjourned in April 2009, they estimated the state would have a healthy $282.4 million ending-fund balance, or surplus.

But that number has steadily shrunk as actual and projected tax collections have declined in recent months. Johnson's forecast in early December showed a $44.4 million surplus, but in early January he had lowered it to $16.9 million and now to a negative $62.5 million.

On Jan. 29, Gov. Brian Schweitzer's budget director, David Ewer, forecast a $5.6 million general fund budget balance as of mid-2011.

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On Monday, Ewer dismissed Johnson's latest numbers as meaningless at this time.

"These numbers are not relevant because they rapidly change," Ewer said. "We will use November 2010 numbers - the best we will have - in preparing the governor's budget (for the 2011 Legislature). We have $330 million in cash today."

In the past, Ewer had regularly told reporters Johnson's monthly revenue estimates were about in the same range as his own budget office's forecasts. But that was before Schweitzer in late January teed off on the Legislative Fiscal Division's forecasts, saying: "They've never been so wrong for so long."

Wherever he speaks, inside or outside of Montana, Schweitzer has boasted that Montana is one of two states nationally, along with North Dakota, that is in the black financially.

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Last month, Schweitzer initiated some preliminary steps authorized by state law that will formally allow him to reduce the state budget, even though the Legislature isn't in session. By law, the governor can cut state programs by up to 10 percent.

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Meanwhile, Johnson's projection said state revenues are now nearly $350 million less than what the 2009 Legislature estimated and about $70 million worse than he forecast a month ago.

His latest projection showed individual income taxes for the two-year period are $213.1 less than the Legislature forecast, while corporate-income taxes are down $110.9 million from estimates.

Taxes on video gambling, an industry hurt by the recession and the Oct. 1 ban on indoor smoking in bars and casinos, are down $22.6 million, while vehicle fees and taxes are $11.8 million below what was anticipated.

Of the major tax sources, only the taxes on oil and gas production are bring in more money, a projected $33.6 million, than projected last year.

 

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