- Associated Press - Thursday, March 23, 2017

HELENA, Mont. (AP) - Montana lawmakers are considering creating a rainy day fund that would allow the state act quickly in the face of a budget deficit such as the one the state is experiencing now.

But the sponsor of the bill, Republican state Sen. Llew Jones, of Conrad, is at odds with Democratic Gov. Steve Bullock’s office on how to do it.

Montana is one of three states, including Colorado and Illinois, that doesn’t have a designated rainy day fund to manage budget shortfalls, according to Robert Zahradnik, the Pew Charitable Trusts policy director for state fiscal health and economic growth.

Instead, the governor and legislators have sought to leave enough of an ending-fund balance - $300 million in recent years - to absorb any revenue dips or unexpected expenses over the two-year state budget cycle.

Jones told a joint meeting of the House Appropriations and Senate Finance and Claims committees Thursday that leaving that much in reserve has been effective for the state in the past, but it’s a slow cure for recovering from a shortfall. He pointed to the difficult spending cuts lawmakers are making this legislative session to fix a budget hole caused by the downturn in energy prices and production.

“The world talks about what we’re doing to education, to the nursing homes, etcetera,” Jones said. “But that would have been less severe had this bill been in place.”

Jones proposes setting aside 50 cents of every dollar that comes in above the Legislature’s revenue estimate to go into a new account called the budget stabilization reserve fund. The rules guiding how to use that fund would require only a $200 million ending fund balance this year instead of $300 million, he said.

When a budget deficit is projected, the governor would be allowed to transfer money from existing special revenue accounts, such as the long-range planning account used for capital projects. A transfer could be made only if the governor cuts $1 in state spending for every $1 transferred from an account.

The governor could repay those transfers from the new rainy day fund, under the bill. The governor also would be able to use the fund to pay down debt on bonds.

Bullock budget director Dan Villa said the governor opposes the bill. He said Montana should follow the model that North Carolina is considering, and set aside 15 percent of revenue growth for the rainy day fund.

Using the state’s revenue estimate as the basis for depositing money into the fund is unwise because that estimate is frequently wrong, he said.

Villa also proposed that the governor should only be allowed to make transfers from the state’s wildfire fund, which is already set up as a type of rainy day fund. Villa said he worried that transferring money from the long-range planning fund and other accounts could affect the state’s bond rating, and could result in political repercussions for the governor.

He also opposed the condition that transfers could only be made with spending cuts.

Zahradnik, who has been working with Jones on the proposal, said Jones’ bill is a good one, but agreed that Villa’s system of depositing money into the fund based on revenue growth could be a better method.

Jones said he considered it progress that Villa is seeking to change the bill rather than kill it, and said he would be open to reasonable amendments that make it better.

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