There are a number of important facts to bear in mind when it comes to balancing the budget for the next (2014-2015) biennium.
One is that right now, December 2011, it's hard to predict whether or not we will have the revenue to sustain current State programs. As the 2013 session approaches, it will be the job of the Revenue and Transportation Interim Committee, on which I serve, to predict revenue for the next biennium. And we can only hope that we do a better job this time around. It turns out that in the 2011 session, we badly underestimated revenue for this biennium, and as a result failed to fund programs that we could easily have afforded. The fact is that the Republican majority in the Legislature refused to acknowledge that the revenue picture was improving. What better way was there to "shrink government" than to insist, contrary to the facts, that the money to pay for essential programs simply wasn't there?
However the revenue estimate turns out, the important thing to remember is that the budget must be balanced. The Montana Constitution requires it: the Legislature just can't go home until it has built and passed a balanced budget. The question for any legislature is how to get that done.
For some the answer to any budget shortfall is straightforward: just cut spending. As Republican Senator (and current gubernatorial candidate) Jeff Essmann once put it, "the proper budget prescription is a ranking of priorities and the elimination of those programs that are not critical". That's easily said, but is it really possible? The problem is that the lion's share (80 percent or so) of our budget goes to education, health and human services, and corrections. Which of those can be cut? And by how much? Any fair look at those programs shows that on an on-going basis, all were underfunded in 2011.
When money is tight, state agencies are always called upon to prepare for cuts, but it would be foolish to try to balance the budget with cuts alone. On the contrary: some cuts may be needed, but we also can, and should, take steps to increase revenue. There are a couple of ways we can do that.
First of all, Montana needs laws that force corporations and individuals to pay what they owe. There are several measures we might take in that direction. One would be legislation that prevents major corporations from hiding Montana based income overseas; another would require non-residents to pay taxes on the income they receive when they sell property in Montana. Unfortunately, Republicans in the past several sessions have routinely stopped legislative efforts to collect revenue due to the state.
Second, we must consider increased revenue from sources such as reductions in tax credits (the $37 to $45 million per year capital gains credit comes to mind), and spending the excess money that's accumulated in various agency funds.
Republican legislators usually argue that any tax increase will keep businesses from coming to Montana, but many studies have shown that what businesses most seek is a well educated workforce. In fact those studies show that taxes play a relatively minor role in businesses' decisions to relocate.
On the other hand, public investments in education and healthcare are the best way we can secure the long term economic prosperity of Montana's children and families, and at the same time provide the environment that enables businesses to prosper. If there was ever a time in which we should sustain those investments, it's now when time are tough.