For the third time in 24 years, the Montana Republican Party has trotted out a plan to break and cap the coal tax trust fund, one of Montana’s biggest financial and policy success stories.
A little history is in order. In 1975-76 the coal trust fund constitutional amendment, which put 50 percent of the coal severance tax into an inviolate trust, was opposed by only 13 of 150 legislators and adopted by an almost 2-1 majority of the voters (63.4 percent).
After a century of “rip and run” mining in Montana, where the resources were depleted and all the profits ended up out-of-state, trust fund proponents said, “We have very little to show for our [once fabulous] copper resource.” They wanted people to receive the benefits from a “fair share of our black gold.”
Yet those visionaries understood human nature enough to know that if money from coal development started to pile up in a state account, it would surely be raided by future legislatures. So they protected us from short-sighted legislative greed by requiring a three-fourths vote of each house of the Legislature to take any principal from the trust. But the earnings (interest) of the fund are forever available to the legislature, as is the other 50 percent of coal severance taxes.
The coal trust has been a great success, doing what was intended -- building a savings account, protecting it, letting it grow and using the earnings from it forever.
The coal trust, now approaching $1 billion, annually provides more interest for the Legislature to spend than the direct coal tax revenues themselves. Over 25 percent (now $268 million) provides interest earnings to support infrastructure investment -- nearly $35 million this biennium — and will keep doing that forever. And another 25 percent of the trust is targeted to provide loans to new or expanding locally owned businesses supporting Montana jobs and growth.
But history shows that this approach -- this success -- hasn't been good enough for the Montana GOP.
In 1991, when the trust was generating interest earnings from $474 million, Gov. Stan Stephens tried to pass the “Big Sky Dividend” to divert all funds going to the trust for 10 years so he could spend them as cash. The Legislature wouldn't give his constitutional amendment the needed votes, so he raised and spent political funds to put it on the ballot as an initiative. But the voters soundly rejected it.
In 1997, when we were making money off $589 million in the trust, Gov. Marc Racicot advanced “Today & Tomorrow,” another infrastructure diversion of $20 million a year for 20 years from the coal trust so he and legislators could spend it as cash. But he couldn't secure the three-fourths legislative vote to divert the money or the two-thirds vote to put it on the ballot, so the effort failed.
Now, 18 years later and it’s déjà vu all over again. Sen. Rick Ripley’s proposed “Build Montana” constitutional amendment would keep 90 percent of the funds from going into the trust and use them for, you guessed it, infrastructure. Whatever you call it, Ripley’s effort is another case of “stop putting money into your savings account and let us go on a cash spending spree with it.”
Further, the Ripley approach gives eight legislators the power to determine where hundreds of millions of dollars will go over the next few years. It would throw out over 20 years of scandal-free, politics-free evaluation and funding of infrastructure, done with integrity by the Department of Commerce under both Democratic and Republican governors. State money for infrastructure right now is not a slush fund, but the Ripley approach would put more back-scratching politics and less integrity into the allocation of your money.
So, the people are just going to have to again say “no” to another blatant GOP attempt to rob from our children and grandchildren’s trust funds in the name of infrastructure.
The sad story is that it’s not necessary. Gov. Steve Bullock proposed a sound businesslike approach to infrastructure funding that balances cash (from regular state income, not the coal trust fund) and extremely low-interest bonding.
The Legislature should get back to that prudent approach to funding needed infrastructure and leave our coal tax trust fund alone.