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Montana’s fiscal process – An interview with the Office of Budget and Program Planning

We are reviewing the fiscal process in the Mountain States to provide a resource comparing Idaho, Montana, Washington, and Wyoming. To help with this project, MSPC reached out to the budget office for each state. Here is my interview with Ryan Evans, Assistant Budget Director for the Office of Budget and Program Planning (OBPP), on Montana’s fiscal process. The questions we posed are in italics.

Spending/tax limitsDoes the state have a constitutional or statutory spending and/or tax limitation (i.e. supermajority requirement to raise taxes)?

Mr. Evans: “Montana does not have a tax or spending limit. To issue debt, however, requires a 2/3 vote of the legislature, and accessing funds in trust requires a 3/4 vote under the state constitution. Raising taxes requires only a simple majority vote.”

Balanced budget requirementsDoes the state have a constitutional or statutory balanced budget requirement?

Mr. Evans: “Article 8 of the state constitution (Revenue and Finance) requires Montana to have a balanced budget. Deficit spending is prohibited.”

Restricted/protected reservesDoes the state have a constitutional or statutory requirement for restricted/protected reserves? If yes, is a certain percentage of revenues required to be automatically allocated to reserves?

Mr. Evans: “It requires a 3/4 vote of the legislature under the constitution to access trust funds. Though not constitutionally restricted, Montana also has statutory requirements for the state’s Budget Stabilization Reserve (BSR) that is capped at 16% of the second year of appropriations (Montana budgets on a biennial basis). The BSR is currently near its statutory cap of approximately $500 million. Ongoing revenue contributions into the BSR come from annual general fund reversions in excess of 0.5%. There is also a formal fire suppression reserve account with a statutory cap and refill requirement equal to 6%. That account currently has a balance of around $200 million. Another formal statutory reserve is the capital development fund tied to revenue collections (set with a 12-year compound annual growth formula).”

Non-partisan revenue forecastDoes the state have a non-partisan revenue forecast process? If not, how are revenue forecasts handled?

Mr. Evans: “There is a combined legislative/executive process to develop Montana’s revenue forecast. There is a formal legislative committee process that the governor’s professional non-partisan fiscal staff is part of. Non-partisan legislative staff also does its own estimates. Before the biennial legislative session begins (Montana’s legislature meets every other year) the legislative revenue interim committee reviews recommendations from nonpartisan legislative and executive fiscal staff and adopts a biennial revenue forecast. That interim committee’s membership has an equal number of Republicans and Democrats. Monthly revenue collection reports are also monitored separately by legislative and executive fiscal staff.”

Budget outlookDoes the state have a standing budget outlook process? If yes, how long of a time horizon does it cover?

Mr. Evans: “There are three budget outlook processes that work together. The first is a formal process that looks at a three-year budget and revenue window when building the biennial budget. There is also a five-year budget outlook process conducted by the governor’s office. The legislature also recently created a permanent statutory committee that projects economic indicators over a 20-year window.”

Line-item veto/discretionary spending reduction authorityDoes the Governor have line-item veto authority and/or the authority to reduce agency spending if a deficit occurs?

Mr. Evans: “The governor is authorized to reduce up to 4% of an agency’s appropriations during a deficit. For every dollar of agency spending the governor reduces, up to three dollars can be accessed from the Budget Stabilization Reserve. The governor has line-item veto authority for appropriations only. Policy bills have to be vetoed in their entirety (no sectional veto).”

Tax structureWhat are the main tax sources (and rates) for general fund spending?

Mr. Evans: “The primary tax sources for Montana are personal (graduated) and corporate income taxes, a statewide property tax dedicated to funding local schools, and vehicle fees and licensing. Montana does not have a statewide sales tax.”

Audits Does the state have an independent process for fiscal, compliance, and performance audits of state spending? What entity is responsible for the state’s federal single audit and ACFR?

Mr. Evans: “The state’s federal single audit is overseen by a federal audit coordinator in the governor’s budget office. The state administrative accounting audit office conducts the ACFR. Montana doesn’t have an elected state treasurer or auditor. The legislative audit division handles all fiscal, compliance, and performance audits for independent accountability with all reports provided to lawmakers.”

Performance-based budgetingDoes the state place high-level performance outcomes directly into the budget?

Mr. Evans: “Performance-based budgeting isn’t formally used in Montana. There are a few triggered appropriations that are tied to certain outcomes but there is not a standard process for using performance-based budgeting. That said, agencies are statutorily required to provide goals and objectives that are used as part of the budget-building process to help inform spending decisions. The governor also holds monthly meetings with agency directors to review performance objectives.”

Credit ratingsWhat are the current credit ratings for the state?

Mr. Evans: “Montana is currently rated AA+ by Fitch and Moody’s and AA by Standard and Poor’s. All the ratings show a stable outlook.”

Thank you, Mr. Evans, for your time answering these questions and your service to Montana.

Additional Information

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