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Llew Jones: Return budget surplus to taxpayers

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Rep. Llew Jones, R-Conrad

Rep. Llew Jones, R-Conrad

In response to the COVID-19 pandemic, the federal government poured $14.5 billion into Montana’s economy over the past two years. The sheer magnitude of this temporary economic stimulus drove income tax collections up, despite the reduction in tax rates that was enacted during the last legislative session. It is predicted that the state will have an over $1 billion budget surplus this year. Some are advocating that a special session of the Legislature be held immediately to “rebate” dollars back to taxpayers in a manner reminiscent of the Federal Governments’ recent inflationary disbursements.

Before giving in to this impulse, we should carefully evaluate what other less inflationary options exist for returning this money to taxpayers and what uncertainties face the state.

First, consider the long-term implications of the federal COVID-19 stimulus:

Future generations are now saddled with the largest national debt ever.

Inflation has surged to a 40-year high with no end in sight.

The Federal Reserve has raised interest rates.

We appear to be entering a recession with a real possibility of 1970’s-style stagflation.

A second-order effect of the pandemic is a spike in residential property values driven largely by outside buyers. This has created anxiety among property taxpayers, in particular homeowners.

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Finally, the impact of inflation on the provision of government services is significant with no end in sight. For example, the state is severely short of snowplow drivers, nurses, prison guards, etc.

What should the Montana Legislature do about the current budget surplus? The surplus should be returned to taxpayers, but not through an inflationary direct rebate, but rather by reducing our current liabilities and emphasizing investments that reduce future spending. Here are a few possibilities:

Mitigate the explosion in market value via a temporary property tax reduction combined with permanent steps to control property tax growth.

Address the Warm Spring Mental Health crisis by investing in a regional mental health model that would provide better outcomes while reducing ongoing obligations by up to $50 million annually.

Cash out Montana’s approximate $225 million in bonded debt or liability to eliminate the need for future debt service payments.

Prepare for future fire seasons by filling the state’s fire fund.

Refill the Governor’s emergency fund in preparation for more disasters such as the recent flooding in southern Montana.

Retain adequate state reserves to ensure services are not interrupted when a recession occurs. Everyone expects police protection, roads that are paved and plowed, and prisons that are fully staffed.

The Legislature has an opportunity to work in concert with Governor Gianforte to make structural changes that will produce long-term benefits for taxpayers while ensuring the provision of essential services. This will require thorough evaluation of the governor’s budget (which will be out late this fall) and thoughtfully crafted legislation that is carefully vetted by standing committees with meaningful public input. The proper venue for such deliberate action is the upcoming regular legislative session, not the hothouse environment of a special session.

Rep. Llew Jones, R-Conrad, is chairman of House Appropriations.

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