Montana legislators scrutinize budget, strategize, in face of federal appetite for cuts

Yahoo

28-03-2025

The Montana State Capitol in Helena on Wednesday, April 26, 2023. (Photo by Mike Clark for the Daily Montanan)
It's a lot of money — $7.3 billion.
Those are the federal dollars accounted for in the main budget bill for the state of Montana, nearly half of the $16.4 billion total for the next biennium.
Now, some of those dollars might be at risk, or at least subject to stricter scrutiny.
President Donald Trump, newly sworn into a second term, has embarked on an aggressive plan to cut federal spending with help from billionaire Elon Musk and DOGE, the Department of Government Efficiency.
Montanans have already seen some results — both praised and criticized.
Supporters see red tape slashed and less bureaucracy ahead, but others see dollars for food banks disappearing, U.S. Forest Service workers laid off, and closed bathrooms on federal lands.
In the meantime, the 2025 Montana Legislature is in session, and lawmakers are combing through billions of dollars in House Bill 2, the big budget bill, along with statutory appropriations.
So what happens to the state budget if federal dollars to Montana start drying up?
'I don't want to speak too soon, but I definitely think that we might have to come back for a special session, because you can't craft a budget when a large percentage of it is dependent on those federal dollars,' said Rep. Donovan Hawk, D-Butte, at a recent press availability.
He and other Democrats said they'd like to have more open discussions to plan ahead for federal cuts and even a possible downturn in the economy.
In the meantime, Republican Chairman of House Appropriations Llew Jones said he'd like to squirrel away reserves — a strategy he said can be controversial because some people would rather spend the dollars on social services.
Jones, of Conrad, also said he's planning to put 'triggers' in legislation to bring the Legislative Finance Committee back to Helena for closer budget scrutiny if changes in Washington, D.C., meet certain thresholds and become more than just 'noise.'
'I would like to not run red ink,' Jones said.
Gov. Greg Gianforte's office did not respond to an email about how the cuts at the federal level might affect the way the governor is thinking about the budget.
However, Jones said the separate finance teams for the governor and the legislature have a good working relationship — not always in agreement, but not adversarial — and will communicate about any hardships.
He said it may be that the budget for the current biennium ends up skirting any emergency, and the 2027 legislature ends up dealing with a drop in federal dollars.
So a special session isn't a given, although legislators such as Sen. Carl Glimm, R-Kila, have sounded warning bells about the possibility, specifically related to Medicaid expansion.
Federal money currently pays for 90% of Medicaid expansion, a program set to continue in Montana with a bill signed this week by Gianforte.
'We're going to be back here, and I'm going to tell you, 'I told you so,'' said Glimm during an earlier debate.
Federal dollars account for different portions of the budget for different agencies.
They're a big chunk of the budget of the Department of Public Health and Human Services' budget — an estimated $4.7 billion out of $7 billion for the biennium as proposed in the governor's budget.
That's an estimated 67%.
At a recent press availability, Rep. Mary Caferro, D-Helena, said one concern she has is that the rules for balancing the budget don't include doing so without cutting things like health services.
Caferro said the state has plenty of money, and in the meantime, the Trump administration has been unpredictable, and she'd like to see preparations.
Federal dollars from the Covid-19 pandemic buoyed the state budget, but only temporarily.
'This sugar high, as they call it when they talk about human services stuff, is not going to last forever,' Caferro said.
She said a bill she's sponsoring calls for a Medicaid stabilization fund and would help on one front.
House Bill 880, scheduled to be heard Monday in House Appropriations, would capture any excess money from the state for Medicaid that the health department didn't use, Caferro said.
Usually, she said, that unused money goes back to the general fund, but HB 880 would set it aside and allow the governor to tap it to avoid cuts if needed.
Jones said protecting the health department is one reason he would like to ensure the state has adequate reserves, and in multiple places.
He said lots of money goes to education, but the state can't cut a teacher's salary halfway through the year, and some constitutional protections apply.
'(But) nothing says that you can't cut provider rates. That just sucks to be you,' Jones said of the situation he wants the state to avoid.
The most recent special session took place in 2017, and the Montana Budget and Policy Center said the health department experienced some of the deepest cuts.
'The loser, when you run in red ink, is DPHHS,' Jones said. 'It will be again if there's not reserves.'
Federal dollars are a smaller part of other agencies' budgets. For example, they're just 5% for the Montana University System, albeit still $37 million.
'The Federal Special Revenue funds authorized in HB 2 cover programs like GEAR UP, Perkins and TRiO programs,' said Galen Hollenbaugh, spokesperson for the Office of the Commissioner of Higher Education, in an email.
GEAR UP stands for Gaining Early Awareness and Readiness for Undergraduate Programs.
According to the Montana University System, the grant serves students in 7th through 12th grades to improve high school graduation and college enrollment rates, and it will have served 8,800 students altogether, including 5,800 Native American students, in its duration.
Perkins supports career and technical education, and TriO helps first generation, low-income or disabled students.
At the Department of Environmental Quality, federal dollars make up an estimated 37%, or $52.9 million of $143.9 million, based on the governor's proposed budget for the biennium.
As proposed, federal funds account for 9% of the Department of Justice budget, $31 million out of $338 million for the same period.
At the Office of Public Instruction, federal money for the biennium is $368.7 million, or about 13.6%.
At a recent press availability, Rep. Eric Matthews, D-Bozeman, said legislators received assurances from OPI that funding streams for education remain intact in Montana for the moment, but he said uncertainty exists.
Even though the money from the federal government isn't 'a hugely significant portion' of the overall education budget, Matthews, who is a teacher, said schools already are behind due to inflation, and they're already having a hard time hiring teachers and support staff.
He said cuts could make it more difficult to keep up with inflation and hire educators. Federal dollars fund special education, and he said it would be hard to provide services to students with IEPs, or Individualized Education Plans.
'It would just open up all sorts of potential for lawsuits from parents,' Matthews said. 'The worst-case-scenario is pretty scary.'
Earlier this month, Superintendent of Public Instruction Susie Hedalen said the Trump administration has assured her the money that's supposed to flow to Montana will continue to be sent to the state.
Senate President Matt Regier, R-Kalispell, said the budget started with a $552 million cushion.
But the governor proposed a 'very healthy' budget, he said. If legislators approve a big tax cut and 'seismic shifts' take place at the federal level, he could see the need to hit the 'reset button' in a special session.
'In the big picture, change flips pretty darn quick,' Regier said at a press availability this week.
The triggers that Jones is working on would call for additional Legislative Fiscal Committee meetings if Congress passes a law or the president signs an executive order that means income from the feds hits a certain problematic threshold or the general fund runs into trouble.
That way, he said, lawmakers can figure out if they can work through it in the moment, if they need to have a special session, or if they can hold off until the next regular session, starting in January 2027.
To try to keep the budget steady, Jones also said he's a 'reserve freak,' although he said some legislators in his party disagree with his approach and would rather see spending decrease if federal money dries up.
He said a sizable portion of state income is volatile, 70% from income tax, so to him, that means setting more aside.
'The more variable you make it, the more reserves I want, because the more it gets reactive to recession,' Jones said.
To prepare, he said he requests support from the Legislative Fiscal Division: 'I want you to model the amount of money we need to keep on hand to survive a 20-year recession without slashing and burning everything.'
Jones said it means roughly three to six months of income, similar to what a financial manager will tell a household. For the state, though, it's $1.2 billion, and he said some criticism comes with that high amount.
'They say, 'Geez, you're keeping $1.2 billion in reserve. How dare you?' Well, we're a big budget,' Jones said.