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IR State Bureau - 05/27/07

HELENA — So, what happened to that extra billion bucks that the Montana Legislature had at its disposal this year?

It’s not all spent, and it won’t be, since some has been set aside as a budget cushion for the next two years.

But at least two-thirds of the money will be sunk into a variety of government programs and expenses.

Before we get into the details, however, a few short words about the size of the “surplus” and how it came to be.

Every two years, the Legislature sets a state budget for the coming two years, based on the amount of state tax revenue expected during that period.

When the tax revenue comes in higher than expected, it mostly just piles up, unspent. Legislative revenue forecasters also look ahead to see what to expect in the next two years.

This year, the forecasters said the Montana state treasury would have an additional $1.4 billion to cover increased expenses, new programs, tax cuts or whatever the Legislature wished to do with it for the next two years.

It’s the largest budget surplus the state has ever had, fueled by an economic boom that led to much higher-than-expected collections of state income taxes and oil-and-gas taxes.

Here’s how the Legislature disposed of that extra money:

n About $670 million goes for spending increases for on-going government expenditures, including $400 million just to cover inflationary increases of already existing programs.

n $190 million for construction and maintenance of state buildings and computer-technology projects. The state will use the surplus to pay cash for these projects, instead of the usual method of incurring long-term debt.

n About $120 million in one-time tax rebates, including $400-per-homeowner rebates this year.

n Another $95 million in spending on one-time items. An example is $10 million to public schools to finance start-up costs of full-day kindergarten.

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n About $83 million to cover state agency cost overruns for the current fiscal year. The departments of Corrections and Public Health and Human Services had large overruns.

n A $50 million, one-time deposit into the Teachers Retirement System, to help shore up the financially ailing retirement fund.

n The state’s $15 million share to settle the Blackfeet Indian Tribe’s water rights.

n The $8 million cost of the 2007 Legislature.

n A $100 million “ending fund balance,” which is a year-end cushion that could cover any emergency spending needs.

n Another $85 million in leftover funds, part of which may be used to fund an additional homeowner tax credit next year.

Two years from now, will Montana have another huge surplus pile of cash in its treasury? Or might the spending approved this year eat up any potential surplus, creating a deficit?

It’s too early to say now, of course. But by the time autumn rolls around, state revenue forecasters will be getting out their crystal balls, making predictions on what the 2009 Legislature might have in store for itself.

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