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Charles (Chuck) S. Johnson mug photo

by Charles S. Johnson

HELENA – Financial and political questions surfaced last week after Gov. Steve Bullock’s nearly $400 million infrastructure bill had its first hearing.

His Build Montana Act, House Bill 5, would authorize spending $391.2 million on public works across Montana. Republican Rep. Jeff Welborn of Dillon is sponsoring the Democratic governor’s bill.

The state would raise $212.2 million by issuing bonds, while the remaining money in HB5 would be cash.

A critical question is whether Republicans, who control both the House and Senate, will go along with the Bullock’s proposed financial split. Or will they come up with their own mix and is it one that Bullock will approve?

Republicans are wary about the state going further into debt. If Bullock’s bill passes, the state would owe about $14 million annually for 20 years, with less in the first two and last two years.

The subcommittee chair, Rep. Mike Cuffe, R-Eureka, said he worries that children today will be stuck paying off the bonds until 2037.

“I still have a lot of questions about building long-term debt when we have cash in the bank,” said Cuffe, who called HB5 “a big, boggling bill.”

Yet HB5 received strong support from business, financial, contracting and engineering executives at the hearing. No one testified against it.

The business executives said the combination of Montana’s excellent credit rating and current low interest rates make this an opportune time to bond.

Rich Bruner, president of the Helena market for First Interstate Bank but saying he was speaking only for himself, said the state should not deplete its general fund cash. He backed the bonding plan, saying, “I think borrowing would show a prudent use of your resources.”

Marty Schuma, president of Dick Anderson Construction, said the company rarely operates on a strictly cash basis. He said the company puts its cash where it has the most value and rarely uses it to buy trucks, excavators and backhoes.

“Right now is a great time to bond projects,” he said.

In some ways, Bullock has boxed in Republicans with the financing mix in the bill and his insistence that the Legislature leave a $300 million budget surplus when the session adjourns. Much of the proposed spending, such as for regional water systems, fall largely in districts represented by Republican legislators.

Every dollar Republicans spend in cash instead of bonding for infrastructure is one less dollar they have to return to Montanans in tax cuts, assuming they survive Bullock’s veto pen.

Another way Republicans could come up with money for more cash for the projects would be to raise the state’s preliminary revenue estimates. But Republicans usually back the lower estimates, which helps tamp down state spending.

The Legislature’s revenues estimates are about $150 million lower than what the Bullock administration projects. A legislative panel will be taking a look at the state revenue picture soon.

How much will Republicans have to cut what they spend on infrastructure to meet Bullock’s demand for a $300 million surplus?

“I don’t think you need $300 million,” Cuffe said. “I think $100 million to $150 million ought to make a pretty good rainy day fund (surplus).”

Taxpayers already wonder why Montana is accumulating such a surplus instead of returning more excess funds to them, Cuffe said. The first of a number of Republican bills to cut income and property taxes by millions of dollars will be heard next week.

A top Democrat on the subcommittee, Senate Minority Leader Jon Sesso, D-Butte, said it’s too early to predict what might happen.

“I’m trying to get everybody to understand the entire pie before they start slicing, cutting it into slivers or adding more ingredients,” Sesso said.

One potential complication is that HB5 requires three-fourth majority votes in both the House and Senate on the final floor votes. That’s because the bill includes $26.6 million in coal tax bond proceeds to pay for renewable resource grants and loans.

Such a supermajority is often difficult to achieve, giving 13 senators the power to kill the bill.

The need for such a supermajority should give Republicans plenty of leverage needed to negotiate with Bullock as the bill moves along.

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Some legislators favor moving the coal tax bond fund into a separate bill. That way, HB5 would need two-thirds votes, but not three-fourths votes.

State Budget Director Dan Villa said the governor is insistent on one bill to stop the debate over funding projects between western and eastern Montana and urban and rural Montana.

There were references to one region of the state trying to squeeze another area out of money if HB5 is split into multiple measures.

Cary Hegreberg, executive director of the Montana Contractors Association, called for a single bill and warned what would happen with multiple bills:

“We think that will simply encourage a process that will result in trying to decide who gets the pork chops and who gets the bread crumbs.

Bullock wants to pass an infrastructure bill through this session. He says it would pay for much-needed projects and create nearly 4,300 jobs.

But Bullock also needs to help deliver some money for infrastructure improvements in the eastern Montana region facing the impacts of oil and gas development.

Two years ago, Bullock vetoed a bill that passed overwhelmingly to provide $35 million for the oil and gas counties. He vetoed that spending bill and some others in order to maintain the $300 million surplus that he insisted upon then and is insisting upon again.

It outraged a number of local officials in eastern Montana. Even some Democratic legislators and other Bullock supporters privately have called this 2013 veto the biggest mistake of his tenure as governor.

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Johnson is chief of the Lee Newspapers State Bureau in Helena. He can be reached at (800) 525-4920 or (406) 447-4006. His email address is chuck.johnson@lee.net.

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