State revenues will be $67.7 million to $77.7 million higher for the fiscal year ending June 30 than had been previously projected, the Legislature’s chief revenue forecaster said Thursday.
Individual income taxes will be $49.6 million to $51.6 million higher, while corporate income taxes will be from $18.1 million to $26.1 million higher, Terry Johnson, principal legislative fiscal analyst, told the Legislature’s Revenue and Transportation Interim Committee.
He attributed the increases to strong growth in wage and salary income, higher individual current-year tax payments and improved corporate profitability.
Throughout the 2011 legislative session, revenue estimates were a highly contentious issue. Democratic Gov. Brian Schweitzer and Budget Director David Ewer sharply and frequently criticized Johnson’s estimates for being too conservative and not fully reflecting a rebounding economy. The Republican-controlled Legislature used Johnson’s less optimistic projections, which had been unanimously approved in mid-November 2010 by a bipartisan legislative committee.
The Schweitzer administration had no immediate response to the new revenue estimates from the Legislative Fiscal Division.
Revenue estimates are critical numbers because they in effect determine how much money the Legislature will spend overall as it sets budgets for K-12 education, higher education, human services, corrections and other programs. Like most states, Montana has a balanced budget provision in its constitution that says appropriations by the Legislature cannot exceed anticipated revenue.
Johnson said the improved revenue outlook for the 2011 fiscal year ending June 30 will increase the beginning ending fund balance, or surplus, for the 2013 biennium, which begins July 1.
“Without accurate details to explain the revenue improvement, it is unknown whether these changes are one-time or ongoing,” Johnson said.
The Legislative Fiscal Division will analyze the issue further as information from all the individual income taxpayers for calendar year 2010 becomes available this fall.
Through May 31, actual state revenue collections are $132.2 million, or 10 percent, more than the previous year and $79.5 million, or 4.9 percent, more than the legislative revenue estimate, adjusted for the impacts of bills that passed.
This bipartisan interim legislative committee will set the initial revenue estimate for the 2013 session. It can be modified by the Legislature.
The separate Legislative Finance Committee discussed the possibility of creating a council of economic advisers to formally assist the Legislative Fiscal Division in recommending revenue estimates. Johnson said he already surveys natural industry businesses and others to help come up with his recommendation.
Rep. Dick Barrett, D-Missoula, a retired economics professor, said he doesn’t believe there’s anything wrong with the current revenue estimating process economically speaking.
“It contains errors, and that’s always going to be the case in projections,” he said.
Barrett said the errors are small in an economic sense — Schweitzer’s estimate was 1 percent or 2 percent higher than the Legislature’s — but it was “a big deal politically.”
“If we have 1 percent to 2 percent accuracy, you’ve done your job, and it’s time to go home,” Barrett said, adding that he thought that having a council of economic advisers to refine the estimates would be “frankly, a waste of time.”
Agreeing was Rep. Brian Hoven, R-Great Falls.
“The estimate needs to be conservative,” he said. “If we are conservative, no bad things happen.”
Sen. Christine Kaufmann, D-Helena, disagreed with Hoven that bad things don’t happen with a conservative revenue estimate.
“We see on the front page of the paper that bad things happen when we are too conservative,” she said.
Kaufmann was referring to news stories this week that hospitals, nursing homes, assisted-living centers and other health care providers will see their Medicaid payment rates slashed 2 percent to 10 percent this summer, because of budget cuts approved by the 2011 Legislature.
Owners of assisted-living centers said they’ll probably start turning away Medicaid-covered patients, possibly routing them to more expensive nursing-home care.
“I think the big thing is your independence, and you’ve done a good job of that,” Sen. Bruce Tutvedt, R-Kalispell, told Johnson. “You need to be independent of the floor above us (where the governor’s office and his budget office are).”