A partisan battle over how to patch a $227 million hole in the state budget escalated Friday when Republican legislative leaders said Gov. Steve Bullock was "grossly overstating'' their party's interest in a proposed compromise.

Earlier this week, Bullock’s office said it was close to an agreement to patch the hole through a combination of cuts, temporary tax increases and transferring funds.

But Republican legislative leaders shot back Friday, saying the governor was getting ahead of himself and mischaracterizing where the GOP sits at the bargaining table. They also questioned the governor's call for a deal to be in place by Thanksgiving.

Dan Villa, the governor’s budget director, has said some sort of deal needs to be struck before a Nov. 28 payment the state must make to local school districts. 

The governor’s office said this week it would not be able to make the payment to schools unless either lawmakers in a special session agree to a combination of temporary tax increases and fund transfers, or if the governor makes deep cuts to nearly every state agency.

But Friday, Sen. Llew Jones, R-Conrad, said the governor’s office can find a solution to make the schools payment without involving the Legislature by transferring funds from the treasury as a temporary loan.

“We could cash flow through this issue if we needed to,” he said.

The Legislative Fiscal Division released a chart on Wednesday also saying a transfer from the treasury fund is possible.

But Villa said his office has already done an analysis of where the state can borrow funds and determined there isn’t enough eligible money in the account to make the school payment. The treasurer’s account contains money that belongs to the state, but also schools, cities and counties. Some of the funds are restricted to certain purposes by law and can’t be transferred by the governor.

Susie Lindsay, a spokeswoman for the Legislative Fiscal Division, said she doesn’t have the same legal concerns as Villa.

“I think (Villa’s) point is he’s just not going to use that option,” Lindsay said.

Even the Republican Superintendent of Public Instruction weighed in, sending out a press release late in the day saying there is enough money to pay the bill.

Montana is in a budget crunch because lawmakers adopted a revenue estimate that has so far proven to be overly optimistic. Through the end of fiscal year 2017, which ended in June, revenues were down $75 million from what was expected, leaving the state to start out the biennium in a hole.

Based on revenue collections after an Oct. 15 deadline, Villa’s office has estimated revenue growth for the rest of the year at 4.3 percent, while the estimate the budget was built on assumed growth of 6.6 percent. To climb out of the $75 million hole the state started this biennium in, Villa said growth would need to reach 10 percent.

At the start of October, Villa’s office certified revenues low enough to trigger a law that allows the governor to make cuts of up to 10 percent to most state agencies. A list of the proposed reductions, which includes cuts to early childhood programs, tuition increases and prison guard layoffs, has caused outrage statewide.

The governor’s office proposed a plan to address the budget shortfall by splitting the $227 million problem roughly into thirds. The first third would be filled with temporary tax increases to pay a $75 million firefighting tab after a summer when more than a million acres burned.

Another $75-$80 million would come from fund transfers and cuts to budgets the governor doesn’t control, such as the Legislature and Attorney General's office.

The final $75-$80 million would be cuts made by the governor’s office through a law that allows him to reduce most agencies’ spending by up to 10 percent.

The governor’s office released a list of possible tax increases and ways for the Legislature to transfer money, but didn’t release how it would make its own third of the cuts.

Earlier this week, Villa said he expected a deal to be reached in the coming days and a special session would follow in the weeks after. But Republican Austin Knudsen, speaker of the House, said it’s “grossly overstating” where Republicans stand.

“Candidly, we still have some issues about the governor’s proposed cuts and his reluctance, for a lack of a better term, to show his hand,” Knudsen, R-Culbertson, said. “He certainly would like us to come in and raise some taxes but he refuses to say what he’s going to do.”

Knudsen said he’s still not sure there’s even a revenue problem and wants to wait for new projections in the coming weeks. On Friday, he called the revenue shortfall a “perceived deficit,” even though the state is starting the biennium in a $75 million hole and revenues so far this fiscal year are not meeting the rate of growth lawmakers predicted.

Rep. Nancy Ballance, R-Hamilton, said there’s still an appetite from Republicans to consider temporary taxes to pay a nearly $75 million fire bill, but she also questioned if the revenue problem is as large as the governor is making it out to be.

“We’re not even sure this revenue issue is real and won’t know that until we get further down the line,” she said. “So raising taxes on a permanent basis to cover something that we still believe is a temporary shortfall revenue, if any shortfall at all, is not something our people will gravitate toward at all.”

Rep. Casey Schreiner, D-Great Falls, fired back at Republicans on Friday, saying it’s their fault the state is in this situation. While Bullock would have to make cuts to balance the budget, the Republican-dominated Legislature is responsible for creating the $10.8 billion state budget by adopting revenue estimates and setting spending.

"It was the Republican majority's budget that created this crisis, and now they want a pound of flesh before they'll consider helping us fix the mess they made,” Schreiner said. “Democrats won't be blackmailed into granting a sweetheart deal to Republican leadership just so they'll finally do their constitutionally mandated jobs. Republicans must get serious and work with us on long-term, bipartisan solutions that will benefit all Montanans."

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