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The Montana State Capitol in Helena

The Montana State Capitol in Helena.

State Sen. Pat Connell (guest column, Nov. 3) offers the timeworn, and simple, solution for dealing with a budget imbalance: raid the piggy bank!

The piggy bank is Montana’s coal severance tax endowment fund. Coal mining, while benefiting many current Montanans, depletes a natural resource. The coal severance tax endowment ensures that the depletion of coal reserves provides permanent benefits to Montanans. Without income generated from the endowment, still higher future taxes will be needed to deliver state public services. Fifty percent of the coal severance tax is currently spent in a variety of areas, and 50 percent flows to endowment funds that generate income to benefit future as well as current Montanans.

In 1980 I hosted a symposium on the Alberta Heritage Savings Trust Fund (AHSTF), a fund established by Montana’s Canadian neighbor. A 1976 Alberta law required 30 percent of the province’s non-renewable resource revenues (mainly from oil and gas) to be saved. The AHSTF quickly grew to U.S. $7.5 billion and would now be over U.S. $100 billion had Albertans the patience and discipline to follow the 1976 policy. But fiscal discipline broke down. The value of the AHSTF is now less than in the 1980s. It was easier to raid the piggy bank than to raise taxes or cut spending.

Bad habits often persist. Once broken, a piggy bank is difficult to reassemble. Adequate levels of state spending require tax increases, or even new taxes such as a sales tax or carbon tax. That is reality. The alternative is a level of state services and infrastructure not worthy of this great state.

Yes, cut spending where warranted (this is always desirable), but Senator Connell and his colleagues should face the reality that increased state tax revenues are needed for good government — now and in the future.

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Roger S. Smith is an economist who lives in Polson.

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