Montana government’s mythical spending spree

Austin Knudsen

Austin Knudsen

Two prominent Republican legislators published an op-ed in Wednesday’s Billings Gazette calling for an end to “irresponsible spending” in Helena.

House Speaker Austin Knudsen, R-Culbertson, and House Majority Leader Ron Ehli, R-Hamilton, say they want to be “a check on the governor’s spending and expanding government.” They also say that Montana faces a tight budget this year because of falling prices for oil and agricultural commodities and a “non-existent timber industry.”

Because of “poor management and excessive regulations,” they say, revenues are too low to meet basic costs. They don’t explain how poor management and regulations made oil and food cheaper, and they don’t explain how a nonexistent timber industry managed to bring in $296 million in labor income in Montana as recently as 2013.

They do say that state government has added “well over 1,000 new state employees” in the last 12 years. Why 12 years? Presumably because that matches the terms of Democratic governors Brian Schweitzer and Steve Bullock.

So how accurate is all of that? Has Montana been on a spending spree? Well, by some measures, it’s actually worse than the two House members depict.

According to the state of Montana’s Comprehensive Annual Financial Reports, the state had 18,801 full-time equivalent employees in 2004. Twelve years later, that number had increased to 22,991, up by more than 4,000 employees, including university system employees.

Ron Ehli

Ron Ehli

The government spent $5.4 billion in 2015, 50 percent more than it spent in 2004. All forms of tax revenues went up dramatically in that 12 years: Taxes on natural resources more than doubled, personal income tax revenues almost exactly doubled, and corporate income taxes increased more than 150 percent.

Pretty awful, huh? But what else happened in that 12 years?

For one thing, Inflation alone accounts for nearly a billion dollars, or about half, of that spending increase. For another, Montana grew by just about 100,000 people in the last 12 years, a 10 percent or so population increase.

Personal income increased more than 50 percent, to nearly $41 billion. Visits to state parks increased by 300,000 a year. Montana added more than 600 miles of paved roads. More than 3,000 additional students were attending universities or colleges of technology. District court filings increased 40 percent.

The number of employees in the state’s Office of Public Defender increased 6,500 percent from 2004 to 2011 after the American Civil Liberties Union sued over inadequate representation for poor people. Jobs across the state were created for 26,000 people.

Through all of that, government’s bite on the average taxpayer barely changed. The effective tax rate (personal income tax revenues divided by total personal income) was 2.3 percent in 2004. In 2015, it was 2.6 percent, but most of that increase came back in 2006 when legislative tax reforms took effect. Those reforms, you may recall, dramatically cut tax rates for the wealthiest Montanans and cut rates a little for just about everybody, but other changes in the tax laws actually made taxes go up for about 24,000 households.

State employees made up 5.27 percent of the workforce in 2004. By 2015, that number had increased to 5.41. But federal employment dropped slightly during that period, so the chance that one of the next 20 people you pass on the street works for the state or federal government hasn’t changed much.

State expenditures, as a percentage of personal income, actually have fallen slightly since 2004. State debt as a percentage of personal income has been cut in half since 2004.

One thing conservatives and liberals ought to agree on is that no matter how much money they are willing for government to spend, none of it should be wasted. Ehli and Knudsen are right to take a hard look at every penny and every position, especially when major industries are being hurt by falling prices.

But they are wrong to exaggerate what has happened in Montana over the last dozen years. Partisan finger pointing is no substitute for sound fiscal policy.

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