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By Bob Brown
Senior fellow
O'Connor Center for the Rocky Mountain West
T he recent passing
of former Montana Gov. Tom Judge has caused me to reflect on his time
of leadership and the accomplishments of his administration.
Judge presided at a time of change and reform. He signed far-reaching
and historic legislation into law. Under his leadership Montana’s
new and progressive Constitution was implemented.
Judge and the Legislature of his time were able to focus on philosophical
goals, in part because during the Judge years state government was in
one of those rare periods in Montana history of budget surpluses. Liberated
from having to prioritize in making budget cuts and agonize over whether
to raise taxes, the Judge years were characterized by lofty reform and
the comparatively easy decisions of what to do with all the money.
One idea emblematic of Judge’s time was the “Homeowners Property
Tax Relief Initiative,” which reduced property taxes on Montana
owner-occupied homes by about $100. The money to pay for the popular one-time
rebate came out of a large surplus. Plenty of money was left after the
rebate.
Two decades later, during the administration of Gov. Marc Racicot, the
state treasury again contained a surplus. Like Judge, Racicot didn’t
miss a good political opportunity. He called for returning a portion of
the surplus to income taxpayers who were primarily responsible for it.
“The people didn’t say ‘keep the change,’”
he famously proclaimed.
Today we see a repetition of history. The current governor,
with a record surplus, proposes to give every resident Montana homeowner
a cash rebate of $400. The impact on the projected budget surplus will
be about $100 million dollars. The Republicans have a competing plan for
tax relief for businesses as well as homeowners.
As history is repeated, however, this isn’t where the story is
likely to end. Within five years of the Judge $100-per-homeowner rebate,
the state economy was in a tailspin symbolized by the collapse of the
venerable Anaconda Company in 1982. Energy and agricultural prices sagged
at the same time. To maintain funding for essential services while not
raising taxes, Gov. Ted Schwinden proposed, and the Legislature agreed,
to tap the Educational Trust Fund created in 1975 when times were good,
and which had grown to nearly $80 million by 1986.
Initially the Legislature had intended that only the interest from the
special education account be used for the ongoing support of public schools,
but the actual corpus of that trust was used for that purpose when the
governor and Legislature saw no better alternative. The Education Trust
Fund balance reached zero in 1990.
The tough times in the years that soon followed the Racicot rebate were
made no easier by the decision to return the “change.” Fearful
of stifling an economic recovery, Gov. Judy Martz, like Schwinden, held
the line against tax increases. Unlike Schwinden, Martz had no accessible
reserve to fall back on.
I tell this story because government has on-going, never-ending responsibilities.
Citizens can legitimately disagree about the extent of those responsibilities,
but in a civilized society there is an inherent need and expectation for
services provided by government. In Montana, the temptation to buy popularity
in the short term has bought nothing in the long term because routine
obligations for services have forced the piper to be paid.
Either or both of the rebate plans promised in this election year will
no doubt be approved by the next Legislature. But Montana’s economy
is powerfully influenced by price fluctuations beyond our control. Predictable
deficit-related federal budget reductions in coming years will seriously
impact Montana since half our state government spending comes from federal
dollars in such areas as highways, health care and education. The state
will have to come up with new revenue; and what it will give back in 2007,
it will take back from taxpayers again down the road.
Forty-five states keep “rainy-day” funds of some kind. Montana
is one of the few that does not. Our current huge surplus provides us
a rare opportunity to show that we have learned from our history. Adjusted
for inflation since 1986, the Education Trust would have a value of $148,102,000
by the CPI of today. That is the minimum we should set aside now.
Bob Brown is an educator who served Montana in both of
Montana's House and Senate and Secretary of State and is a Senior Fellow
at the Center for the Rocky Mountain West.
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