�ԹϺ���

EPISODE DESCRIPTION

The 69th Legislature has less than a month left. Today, we’re talking money. 

EPISODE TRANSCRIPT

 Shaylee Ragar: The 69th legislature has less than a month left. Today we’re talking money. This is TheSession, a look at the policy and politics inside the Montana State House. I’m Shaylee Ragar with Montana Public Radio. 

Eric Dietrich: And I’m Eric Dietrich with �ԹϺ���. 

Shaylee Ragar: It’s the Eric and Shaylee show today, just the two of us. How are you feeling? 

Eric Dietrich: It’s been a long week. 

Shaylee Ragar: Well, we’re lucky to have you today, Eric, you’ve been following the money at the legislature very closely. We have a lot to talk through. 

Eric Dietrich: Yeah, we have several billion dollars of things to talk through, but we’ll do our best. 

Shaylee Ragar: Yeah, it’s a lot of money. Before we dive into that, we wanna give a quick update onto something that listeners have been hearing about, which is an ethics investigation into Senator Jason Ellsworth.

The Senate has voted to formally punish the Hamilton Republican. He’s been stripped of all committee assignments during the session and during the interim and formally banned from the Senate floor for life. He’ll be voting remotely for the rest of the session. He is still allowed to vote and lawmakers have a lot left to still vote on.

So let’s get into it. Let’s start with the big news from last week, which is that the House got to debate HB 2, the state’s budget bill. Remind us about that work that led to that moment, Eric.

Eric Dietrich: So for folks unfamiliar, House Bill 2 is traditionally the state’s big budget bill. It’s basically agency budgets.

So you think about the Department of Natural Resources and Conservation, FWP, Department of Public Health and Human Services, all those big long names. This is the bill that funds their work and this week was the big milestone because the budget bill came outta the first committee and is onto the floor. 

So this is the first time that lawmakers who aren’t on those budget committees get a chance to vote, which is kind of the final political dynamic that affects the budget.

Shaylee Ragar: Right, so it gets to the floor. But ultimately, after hours of debate, only two amendments passed, Eric. 

Eric Dietrich: So what we saw Wednesday was the chair of the House Appropriations Committee, Llew Jones, Republican from Conrad, he got up there and said, ‘Don’t change it. You can bring your amendments, but I’m gonna resist them all.’ 

“’Cause whenever I’ve supported a budget being amended on the floor in any manner other than technical, it becomes unstable and it becomes angry.”

I think his preference is to have that stuff debated out in a setting where people have had more expertise on the issues as opposed to the whole House floor, where a lot of times the votes feel a little bit more political or symbolic.

Shaylee Ragar: So I wanna touch on just the two minor changes they made, which was to add funding for a hunter’s education program that found bipartisan support and then another amendment passed to add some funding for two more railroad inspectors under the Public Service Commission–fairly small potatoes in this giant budget.

Eric Dietrich: Yeah, both of those are relatively small sums of money in the grand scheme of the budget, which is commonly what we see in floor debates, right, they’re kind of debating the stuff that is on the margin, like just on the verge of getting in or being out. 

It’s more stuff that kind of has this small dollar figures, relatively speaking, but outsize political or practical significance to the public. 

Shaylee Ragar: So just how big is the budget, Eric?

Eric Dietrich: This year’s figure: $16.6 billion, is what’s currently in there. And that’s over two years. So that’s for the two year fiscal cycle that starts the beginning of July.

Another way to think about that is how much per Montanan per year is being spent, and that number is $7300. One thing to keep in mind with that figure is a big chunk of that, 44%, is actually federal funding. There’s a lot of federal money in the state budget for in particular healthcare programs and highway stuff.

Shaylee Ragar: So federal funding is nearly half of Montana’s state budget. We’ve been hearing a lot of news out of Washington DC that the Trump administration wants to do a lot of cutting and has started doing a lot of cutting to federal funds that states receive for a variety of different programs and reasons, but there’s still a lot of uncertainty.

What does this mean for the state’s budget? 

Eric Dietrich: Lawmakers seem to be building the budget, assuming that federal spending is largely unchanged. Like there’s a little bit of talk about kind of contingency measures and socking money away from a rainy day and that sort of stuff, but I think the reality is if any of those big, crucial federal programs get cut in a major way, like there’s just no way around it. The legislature would have to come in for a special session and figure out what to do.

Shaylee Ragar: Right, that’s part of the problem is lawmakers can’t really act until the feds act. But broad strokes, Eric, where are the core disagreements over spending?

Eric Dietrich: The classical philosophical disagreement we see is a party one. Democrats usually want to spend more money. They usually think that, ‘hey, if you spend a little bit more money, you could do a little bit more good work.’ Republicans, by and large, are more cautious about spending money, would rather not spend money unless you absolutely have to.

That dynamic often plays out. The budget committee is more or less controlled by centrist Republicans. That creates a dynamic where, in some cases, they end up negotiating to the left and the coalition is them and the Democrats that gets funding in or resists urge district funding and sometimes it’s them and more conservative Republicans. 

This year, it’s actually more complicated. The budget passed with bipartisan votes with opposition from some people in both parties. 

Shaylee Ragar: Right, and I do think it’s interesting to note times where there are exceptions to that dynamic. For example, Democratic Representative SJ Howell brought an amendment to cut about $12 million from the budget for out-of-state prison beds with for-profit prison company, CoreCivic.

“You’ll be excited to hear, we’re gonna talk about striking some funding from the budget.”

Now, Howell is philosophically opposed to spending money this way and says the state should focus on reducing incarceration instead. But Republicans, like Representative John Fitzpatrick, say that spending is absolutely necessary. They say the state does not have another option. The legislature is trying to work out a plan to expand the state’s prisons this session, but the facilities are overcrowded. 

“We sent the folks outta state because the correctional system in this state is stuffed to the gills.” 

So Eric, what happens next with the budget?

Eric Dietrich: So that big budget bill is now through the House, which means it’s off to the Senate and there’ll be more debate, more revision. Ultimately, the House and the Senate before the end of the session need to agree on the same version of the budget. Once they agree on the same version, then they’ll be able to send that back to Gianforte for his signature.

Shaylee Ragar: Right, and one thing lawmakers are really proud about with the state budget is that it must be balanced. There must be enough revenue to pay for their spending. 

Eric Dietrich: That is something the Constitution requires, and nobody ever wastes an opportunity to point out that that is not how things work with the federal budget.

Shaylee Ragar: That’s right, that’s so true. I want to think of a kind of visual representation of this for our listeners. I’m thinking back to a few weeks ago when you and I were at a St. Paddy’s Day party and we were playing Giant Jenga, which is one of my favorite party games.

So I’m thinking about the budget in the way that the subcommittees that started their work back in January in the House started building that tower, they started laying those small, wooden bricks to build this big tower. And then lawmakers come in and they wanna pull funding and then they wanna add back in some spending, and then they wanna make changes to how the state generates revenue. And the goal is to keep it from wobbling.  The goal is to keep it from falling down altogether. So let’s talk about the revenue side of things. 

Eric Dietrich: Yeah, the other half of the budget picture and the revenue stuff is actually not included in House Bill 2. The revenue changes are made with other bills that are moving through the process separately.

We had a lot of budget bills moving last week too. In fact, two of the major bills on income and property taxes that have been backed by the governor were voted down by the Senate Taxation Committee, while the House was debating the budget.

Shaylee Ragar: Right, so let’s start by digging into the property tax proposal that is Governor Greg Gianforte’s headlining proposal.

What happened to that bill? 

Eric Dietrich: Yeah, so that bill has been pending for a while. It’s passed the House and it’s attracted some friction in the Senate. And so as of now, it’s been voted down in the Senate. It might come back up, it might be amended or kind of salvaged for parts and placed in something else, but it’s looking right now like lawmakers are interested in other ideas for property tax relief instead.

And just as a refresher, that bill aims to lower taxes on primary homes in part by raising them on secondary homes and Airbnb-type rentals. 

Shaylee Ragar: People here always say nothing’s dead until sine die, which is the technical term for ending the legislative session.

Eric Dietrich: The Latin term for ‘we’re fed up with each other and wanna go home.’

Shaylee Ragar: Exactly, exactly. But Gianforte is not going down without a fight. He said at a press conference last week:

“We can’t leave here without implementing permanent property tax relief for the people of Montana.”

Eric, how amenable is he to some of the other proposals that are being talked about? 

Eric Dietrich: Most lawmakers see that as a must get done thing too this year. That doesn’t mean they’re all on the same page about how to do it, but everybody says it should be done. 

The constraint the governor is trying to put on the discussion is he doesn’t want to use income tax dollars to offset property taxes. The state General Fund funded mostly by income tax dollars is pretty flush right now, there’s like a lot of extra money kicking around there. 

For some folks, it would be an appealing option to take that extra money and use that to offset the property tax dollars. The governor, in part because he wants to cut income taxes too, is adamant that he doesn’t wanna sign a bill that does that.

Shaylee Ragar: Right. So let’s get into that income tax discussion because that is another big priority for the governor. He talked about a post on social media last week where Donald Trump Jr. endorsed his proposed income tax cut. 

“Don Jr. said, our tax cut is just like the one that was pushed by the president.” 

Eric, talk us through what the governor wants to see happen.

Eric Dietrich: Yeah, so the Gianforte budget proposal calls for a full percentage point reduction to the state’s top bracket tax rate, which is currently 5.9%. He wants to pump that down to 4.9. That’d be a pretty big income tax cut for the state. It would cost, you can give or take, $300 million a year in revenue.

There’s some concern from lawmakers in both parties that’s too big a cut. Lawmakers of both parties are floating other income tax proposals that will be smaller cuts and in some cases work in different ways. 

One of the debates is that the governor has said he wants to cut rates for everybody up and down the income spectrum is rhetoric is ‘we need a tax cut for all taxpayers.’

Some of the legislative proposals, including some that are coming from Republicans, would cut tax income taxes only for people with lower and middle incomes. And we kinda leave the rate for higher income folks untouched. Gianforte argues that that’s not fair and not a good direction to take the tax system.

Shaylee Ragar: How would you describe the alliances we’re seeing?

Eric Dietrich: I’m not sure I can describe them, ’cause they seem to be shifting day to day almost. I think things are pretty fluid at the moment. My guess is that what will happen is that eventually we’ll kind of see some sort of proposal emerge that has a critical mass of votes to get through to the governor’s desk.

You know, the saying that’s thrown around the building is ‘51-26-1’; 51 votes in the House, which has a hundred lawmakers, 26 votes in the Senate, which has 50 lawmakers, and then you gotta have the governor on board too, or he’ll veto it. And that’s the political coalition you need to get something through.

Part of the reason we’re seeing votes up and votes down and stuff with tax stuff currently, is that nobody has figured out how to get any current proposal to those thresholds.

Shaylee Ragar: I think we should note briefly too, it is conference committee season, which is where lawmakers can take a couple of different concepts and try to put them together in one bill.

Is that something we could see happen? 

Eric Dietrich: Yeah, and that’s perhaps the most likely thing we’ll see happen is that once folks figure out what compromise will have those vote thresholds in order to get through, they’ll find a bill and they’ll mend that compromise into it. The jargon is that’ll be the vehicle that things get implemented by.

Shaylee Ragar: So it’s kind of like building a Mr. Potato. 

Eric Dietrich:That’s not a bad analogy. 

Shaylee Ragar: Okay, we’re gonna leave it there for now, but it’s time for the segment where we talk about our favorite moment from last week. I’ll start, Eric. It was when Senator Greg Hertz showed up to committee on Budget Day wearing a suit with printed dollar bills all over. Like the suit was just entirely dollar print, so lawmakers know how to have fun.

Eric Dietrich: Yeah, I agree, Shaylee. I don’t think I have a moment that I enjoyed more than that one. 

Shaylee Ragar: Eric, we should get you one of those suits.

Eric Dietrich: Oh my gosh.

Shaylee Ragar: This has been The Session, a look at the policy and politics inside the Montana State House. Thanks so much, Eric. 

Eric Dietrich: Thanks for having me.