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State Legislature Working Toward More Accurate Revenue Forecasts

The Montana Legislature Subcommittee on Taxes and the Changing Economy, Jan. 17, 2018.
Corin Cates-Carney
The Montana Legislature Subcommittee on Taxes and the Changing Economy, Jan. 17, 2018.

When it became clear that state revenues were falling short of expectations during the last legislative session, state lawmakers agreed they should start studying Montana’s changing economy.

Earlier in the session, revenue forecasts from legislative and executive branch analysts said the state’s economy was strong. But revenues ended up coming in way short and state lawmakers are starting to ask why.

They set up a new bipartisan subcommittee of Senators and Representatives to investigate and debate  the massive topics of economic and tax policy in Montana. They met for the first time Wednesday.

“Main street has changed. I guess that’s the best way I could put it. In particular the last decade.”

Senator Llew Jones, a Republican from Conrad, is the Chair of the Joint Subcommittee on Taxes and Changing Economy.

The subcommittee is looking at why state revenues aren’t keeping up with economic growth, and why it’s getting harder to accurately forecast state revenues.

Jones says the state is good at measuring tons of coal, square footage of property, and bushels of wheat.

“But what has walked into the middle of our system has been unprecedented growth in service areas, in particular medical, and penetration of delivery type services, whether its Netflix to your TV or whether it's Amazon to your door. All of which are positives for the state," Jones says. "We’re very good at ensuring that Walmart participates in our economy at some level, but we’re not so good at even knowing the size of the puck that Amazon represents."

The state also generally doesn’t tax Montana’s service economy.

With this perceived change in the economic engines at work in Montana, Jones says elements of Montana’s tax revenue are becoming increasing volatile, and harder to predict.

Because Montana lawmakers built a budget on a revenue estimate that ended up being wrong in last year’s legislative session, the state was forced to cut about 4 percent of its general fund spending.

According to analysis from the Pew Charitable Trusts, revenue forecasting errors by state legislatures across the country are on the rise. Pew researchers attribute this increase to growth of revenue volatility.

Lawmakers are still trying to define what kind of problem the state is facing and to what degree they can do anything about it before or during the 2019 legislative session.

During their meeting Wednesday, subcommittee members agreed to continue to gather information on the different sectors of Montana’s economy, and those sectors expected to grow in the coming decades.

Lawmakers didn't getting too political in their debate. That will likely change once it’s time to start making policy about how to spend and collect state money going forward.

Copyright 2020 Montana Public Radio. To see more, visit Montana Public Radio.

Corin Cates-Carney is the Flathead Valley reporter for MTPR.