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HELENA - Gov. Brian Schweitzer has proposed a state budget that offers something for most everyone.

But there is one catch. It's like a Rubik's Cube and works only if every tiny cube making up the whole cube is lined up exactly in the right place as he proposed. If they're out of alignment, even by a tiny cube or two, his budget won't hold together.

Given the constraints of devising a budget funded by taxes from a state economy coming out a recession, the Democratic governor's final two-year spending plan may be a brilliant stroke politically.

He stole an early beat on Republicans, who will have control of both legislative chambers, on tax issues.

Republicans, who campaigned for months on tax cuts, certainly weren't expecting Schweitzer to come in with a budget that proposes property tax reductions to many businesses.

Likewise, no one figured he could reduce taxes for Montana homeowners. The governor's budget does it through $50 and $100 income-tax credits over two years.

Schweitzer's budget left many of his political supporters pleased.

Leaders of state public employees' unions were surprised when Schweitzer offered them 1 percent and 3 percent raises over the next two years after a two-year pay freeze for many workers.

Schweitzer's budget also would increase spending for K-12 schools and state colleges and universities.

How was Schweitzer able to pull all this off in a general-fund budget that increased by only 1.97 percent over the next two years and contains no tax increases?

Schweitzer used some tricks that will leave budget purists sputtering, although none of them are new to Montana. Some other governors have employed similar moves in the past.

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For starters, his budget is not structurally balanced. It spends more money over two years than the state will receive in revenues. That could create problems in the future.

Schweitzer relies heavily on one-time money to balance the budget. That cash won't be there again for the next governor to replicate the feat.

He called for draining a number of little pots of money set aside for various purposes throughout state government. He would sweep this $95 million worth of one-time money into the state general fund. The biggest pot is the Treasure State Endowment Program, with $18.5 million of coal tax money, which provides grants to local governments.

Critics will say it amounts to robbing Peter to pay Paul.

When it came to funding K-12 schools, Schweitzer played Robin Hood, taking from the rich and giving to the poor, or at least the less rich.

He advocated increasing school funding statewide by $38 million a year. To come up with the money, Schweitzer would redirect state oil and gas tax revenues now going only to schools in a few counties where these minerals are produced. These schools now spend only a third of these revenues overall and stockpile the rest in their reserves. Schweitzer would share all of this wealth with every school district in Montana.

Another Schweitzer trick is putting some big spending at the tail end of the two-year budget period. Delaying the 3 percent pay hike until January 2013 means that this budget would have to pay for only six months of that added cost.

He also relies on $28 million in additional revenue over two years coming from enhanced crackdowns on businesses and people the Revenue Department doesn't believe are paying all the taxes they owe. However, these will require changes of tax laws to collect the money.

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Schweitzer's budget now goes to the 2011 Legislature, where Republicans will have a commanding 68-32 majority in the House and a 28-22 lead in the Senate.

The Legislature can completely rewrite the proposed budget to reflect its priorities, but it still ultimately goes to Schweitzer for his signature, veto or line-item vetoes.

If Republicans don't want to use one-time money, they will have to find the cash elsewhere to cut taxes.

If they don't like grabbing money from the schools with the oil and gas money, where will they find money for a school funding increase? Or will they increase school funding?

The same applies to the tax proposals and the state employees pay plan.

Incoming Senate President Jim Peterson, R-Buffalo, said Republicans will want to help fix the state's troubled pension funds, which Schweitzer didn't address in this budget but has in the past. The question is where will Republicans find the money for this and their other priorities.

Whatever Republicans do, they still have to reassemble that Rubik's Cube.

Charles S. Johnson is chief of the Missoulian State Bureau. He may be reached at (800) 525-4920 or (406) 447-4066. His e-mail address is chuck.johnson@lee.net.

 

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