Money to Burn

When Gov. Steve Bullock vetoed HB 166 last week, you could almost hear Republicans around the Capitol gnashing their teeth.

The bill, sponsored by House Majority Leader Keith Regier, would have permanently cut income taxes by a little more than $40 million a year, which House Republicans touted on Twitter as “returning part of the surplus to taxpayers.”

When, if ever, are these guys going to learn the difference between a budget surplus and cash in the bank? It’s really not that hard - most people who have to balance a check book get it already – but let’s take it a step at a time.

A budget surplus is the difference between revenue the state takes in (mostly in taxes and Federal matching grants) and what it spends on highways, schools, healthcare, corrections and other programs and services. Of course there’s no guarantee that this difference is going to be positive. If it’s not – if it’s negative because the state is trying to spend more than it takes in – then the surplus becomes a deficit.

Now deficits are obviously a problem. For one thing, there’s the constitutional requirement that the budget be balanced. For another, if you’re going to run a deficit, you’ve got to come up with the money to cover it. And the only way to do that, since you can’t borrow, is to use up the cash you have in the bank. And that is exactly what HB 166 would have done if the Governor hadn’t vetoed it.

Far from “returning part of the surplus to taxpayers,” HB 166, along with a grab bag of other Republican tax cuts, put the budget into deficit. And that famous $400 million surplus Republicans keep talking about giving back? It never was a surplus. It was the cash we had on hand that had accumulated as a result of sound past fiscal management. And because of HB 166  and those other tax cuts, we were on our way to eating it down to near nothing.

So lets get this straight: in vetoing HB 166, the governor wasn’t stopping the Republicans from returning the surplus. He was putting the kibosh on their running an unsustainable deficit that could only be paid for by burning through the state’s cash. You’d think Republicans would get that, especially after listening to their incessant complaints about the Federal deficit. But no, on this one they can’t seem to put two and two, or even $40 million and $40 million, together. 

One Hand Clapping

You’ve got to feel sorry for Debby Barrett. She just can’t get no respect.

Barrett, who is (a) President of the Montana Senate and (b) just to be clear, not me, is all bent out of shape by the fact that proponents of the Flathead water compact have asked the legislature not to amend the agreement and to ratify it as is. Writing in the Missoulian she claims that this request – to not amend - is arrogant, disrespectful and “an insult to the constitutional role of the Legislature.” This is simply ridiculous.

Back when the 1979 Legislature formed the Reserved Water Rights Compact Commission, it recognized that in attempting to adjudicate all the water rights in the state, it was inevitable that Federal and tribal claims would come into sharp conflict with the state based claims of Montana’s farmers, ranchers, businesses and households. And rather than consigning those conflicting claims to endless, costly and divisive litigation, the Legislature told the commission to go out, sit at the table with tribes and Federal agencies, and come back with negotiated settlements. I’ll say it again: the Legislature explicitly wanted negotiated settlements.

What the Legislature presumably understood, and Barrett apparently does not, is that a negotiated settlement is a voluntary agreement between two or more parties. Opening up a settlement and changing its terms can only happen if all the parties agree to make it so; it simply can’t be changed unilaterally from one side of the table. That’s a fact the Legislature must face: it can amend the compact if it wants, but if it does, there’s no longer a voluntary agreement. Barrett, and other compact opponents, apparently want the impossible: an agreement that only they will agree to! It’s sort of like one hand clapping.

Barrett claims that “other proposed compacts have not been thrust on …the Legislature with such arrogance and disrespect.” You’re damned if you do and you’re damned if you don’t agree with this claim, but suffice it to say that the commission has always informed the Legislature that if a proposed compact were amended, there would be no guarantee - and certainly no requirement - that the amended settlement would be accepted by the other parties. That is simply reality, and there is nothing arrogant or disrespectful about pointing it out.

Even if it can’t, or shouldn’t, amend the compact, it is important to remember that the Legislature has played an active role in its negotiation. Four legislators, including Barrett (and, full disclosure, me) serve on the compact commission and have had ample opportunity to contribute constructively to the settlement. And for the past two years, the Water Policy Interim Committee has conducted numerous hearings on and studies of the compact and made recommendations to the commission for changes that have largely been incorporated into the agreement.

Barrett also claims – and this canard is popular with other opponents – that the CSKT are “threatening” the state with litigation if the compact is not approved. And indeed, the Tribes will file claims in the Water Court and pursue those claims if compact ratification fails. But let’s get this straight: it was the state that invited the CSKT to the table in order to avoid the litigation that the Tribes would otherwise, by law, have had to pursue in order to have their water rights adjudicated. The state cannot now walk away from the settlement reached at that table and complain that it is being threatened when the CSKT resort to the only remedy available to them.

Barrett resents the fact that she has been presented with what she thinks is a “take it or leave it” deal. But the irony is that that is apparently exactly what Barrett and other compact opponents intend – arrogantly and disrespectfully - to offer to the Tribes: a compact which they have amended to their liking and which the Tribes are apparently expected to agree to without consultation, question or legal recourse.

The Biggest Loser

You’ve got to hand it to Gary Marbut. The man is either going big or going home.

Marbut, who appears to run the Montana Shooting Sports Association as his personal fiefdom, was in town last week promoting a bill to give tax breaks to folks who might someday manufacture ammunition makings right here in Montana. The bill, SB 122, is sponsored by Matt Rosendale, the Republican Senate majority leader and well known drone assassin.

Most people, when they want the legislature to give their pet projects a little juice, settle for something – a credit or deduction or a rate cut - that will reduce their taxes for a while. It’s usually temporary, the idea being that once whatever-it-is is up and running, special treatment will no longer be needed.

Now I am not crazy about this kind of tinkering with the tax system. It creates a slew of inequities and often serves special interests rather than the interests of the public at large. So in that sense, I guess we should be grateful to Marbut, because rather than messing around at the edges of the tax system, he's going big and proposing that his ammunition makers pay no taxes at all.

I am not making this up: Gary Marbut would like businesses that make ammunition components to pay no state taxes at all. Ever.  No state property taxes for schools. No business equipment taxes. No individual income taxes. No corporate income taxes. No taxes even on the income banks or others earn from making loans to ammunition component manufacturers. And even though these businesses will pay no taxes to the state, they will be eligible for economic development grants from the Department of Commerce.

Why on earth is all this largesse needed? Well, it turns out that none of this stuff – powder, primers, and so forth – is produced in Montana, and not much is produced in the rest of the country. A lot of it is imported, presumably because foreign manufacturers are more efficient and produce at lower cost. And would be Montana manufacturers apparently can only compete if they are given a free pass on their state taxes. So what we have here is protectionism, pure and simple.

Folks seeking this kind of special treatment always try to justify it as somehow being in the public interest. So Marbut would have you believe that our Second Amendment rights (you knew that was coming, didn’t you?) will be hollowed out unless we can buy ammunition made right here at home. He presents no evidence at all that there’s a shortage of ammunition, or that foreign manufacturers or Barak Obama are plotting to cut us off cold  turkey, or that gun owners don’t have  enough ammunition lying around already to deal with the threats they endlessly worry about. In other words, he gives us no reason to think that ammunition is more deserving of protection than the thousands of other vital products - medicines, for example - that we import and use in Montana every day.

Marbut also wants us to coddle the ammunition industry because doing so will create jobs. In the questionable game of picking economic development winners and losers, he wants us to pick an industry that by his own admission is too costly and  too inefficient to compete without being propped up by the public. In other words, in Marbut’s topsy turvey world, the biggest loser should be the big winner.