Governor's ‘slush fund' may get legislative oversight

Yahoo

19-03-2025

Photo illustration by Getty Images.
A pot of money estimated to grow to more than $100 million by the end of 2026 — and referred to as the governor's 'slush fund' — may end up having direct oversight by the Montana Legislature.
On just the third day of the 69th legislative session, members of the House Appropriations Committee raised questions about the lack of information in House Bill 4 regarding one item in particular.
The bill described the entry only minimally.
The committee learned it represented an estimated $101 million in interest earnings from remaining federal American Rescue Plan Act dollars allocated to the state during the COVID-19 pandemic, and to remain under control of the Governor's Office, as proposed in HB 4.
Spending for the current biennium was approved last session, but unplanned expenses still come up, such as grant opportunities. HB 4 outlines those budget amendments, mostly for unanticipated federal funds, and $1.27 billion in all, according to a fiscal analysis of the bill.
The significant amount of cash with the Governor's Office and lack of transparency around a plan for it prompted Rep. Mary Caferro, R-Helena, to recently describe the dollars as a 'slush fund,' as have others.
In a press conference this month, Caferro said a bill that would have stabilized rates for Medicaid providers was tabled, and the Governor's Office 'strongly opposed it,' but it has the money to pay for it.
'The slush fund? That could have paid for four years of those provider rates,' Caferro said.
A memo from the Legislative Fiscal Division about the fund said spending included $12 million to purchase the 'old USFB building' for investment, $5 million for a veterinary diagnostic lab building project, and $1.3 million on National Guard recruitment, among other smaller items.
'The interest earned on these funds are not subject to program restrictions and may be spent on any lawful governmental purpose,' the memo said.
Senate President Matt Regier, R-Kalispell, also said this week he had concerns about the lack of legislative oversight when he learned about the fund.
The memo from the Legislative Fiscal Division said $53.2 million of the money, from interest, came out of the 2023 session. It said another $54.2 million was 'appropriated in a budget amendment' in December 2024, to be considered in HB 4 this session.
The bill, requested by the governor's Office of Budget and Program Planning, appropriates amendments for the 2025 fiscal year, and it provides for some spending to continue into 2026 and 2027.
Last session, however, Regier said the bill spelled out the exact dollar amount in that item from the Governor's Office, and this year, a specific figure wasn't included in the bill. Regier also said he does not believe the governor's budget proposal, released in November, discussed the fund.
'I get why the executive would want unrestricted dollars, but that's, in my mind, our job,' Regier said. 'The legislature should be the one appropriating.'
He said the legislature already doubled the governor's emergency fund last session to an estimated $18 million, and this session, it has preliminarily approved another $24 million for the governor to support recruitment and retention of state employees.
Early this week, the Appropriations Committee had yet to take action on HB 4.
However, an amendment in the wings would strike the item from the bill, or change the item to a legislative appropriation.
Rep. Terry Falk, R-Kalispell, requested the amendment, and he said this week he intends to present it, and he believes it easily has support.
'It's not legislative intent for the governor to have money he can just spend willy-nilly,' Falk said.
He said transparency is key for the people of Montana.
'We're fiduciary agents for the people's money and the people's budget. We need to be accountable. People expect that, and they should,' Falk said.
Rep. Llew Jones, chairperson of the House Appropriations Committee and sponsor of HB 4, said he too has requested an amendment to set those funds aside. He said the committee will likely take up the bill next week.
Jones earlier told the Montana State News Bureau the legislature can't direct every dollar of spending, but he told the Daily Montanan this week he anticipates the legislature will have the ability to appropriate the money.
In the past, he and others said the amount of money coming from interest earnings wasn't a large amount, but that has changed.
'It has become a much more significant number,' said Jones, R-Conrad.
The Governor's Office did not respond to a question about whether it would support such an amendment, nor did it respond to the characterization of the dollars as a 'slush fund.'
The memo from the Legislative Fiscal Division said the total actual interest earned on ARPA funds was $80.7 million through Feb. 12, 2025. It said expenditures totaled $18.7 million, leaving a balance of $62 million 'at this point.'
'The Governor's Office has the authority to spend this appropriation, so this balance is at a point in time and may change,' the memo said.
At the initial hearing, Rep. Jane Gillette, R-Three Forks, said she wondered if all the budget amendments should actually be included in HB 4, since its purpose is for spending that couldn't have been foreseen.
Gillette, who said she's most familiar with items related to the health department, wondered if 'mission creep' might be taking place, or miscommunication, and if some items should be in HB 2, the main budget bill, more directly under the control of the lawmakers.
'I'm not really sure what's going on, but it feels like these things should be in the budget,' Gillette said. 'They're not things we didn't anticipate. They're programs that are long standing. And so can you help explain any of that?'
This week, Gillette said she doesn't believe anything malicious is taking place with HB 4, but she said she suspects that as the baton has gotten passed from one administration to the next, some items that represent ongoing spending end up in HB 4 anyway.
'It impedes legislators from getting the full picture,' Gillette said.
In response to Gillette in January, Jones said a conversation about the larger purpose of HB 4 had started, and the committee wouldn't take action on the bill until right before its transmittal deadline, more than halfway into the session, so legislators would have time to learn more.
A budget official from the Budget and Program Planning of the Governor's Office referred Gillette to statute.
Rep. Luke Muszkiewicz, D-Helena, said he appreciated the short narratives in the bill about what the amendments cover. For example, under the Office of Public Instruction, the bill lists farm-to-school grants as an expense.
Those amendments are signed off on by 'approving authorities' for each branch of the government. That means the chief justice of the Montana Supreme Court for expenses related to the judicial branch, for example, or the governor for executive agencies.
But Muszkiewicz said the item from the Governor's Office simply said '31 CFR, Part 35,' or Code of Federal Regulations, Pandemic Relief Programs, and he wanted more information.
'What we have appropriated right now for ARPA interest, for this biennium, is $101 million of that,' said Errolyn Lantz, from the Governor's Office. 'That is a projection of what will be earned on the ARPA interest money through 2027.'
The fiscal analysis for the bill said $92 million was part of the Governor's Office, and Muszkiewicz wanted to know what portion the item in the bill represented.
Lantz said all but $3.6 million comes from ARPA interest.
Caferro also asked whether the item in question should be in the main budget bill. Amendments in HB 4 relate to the current 2025 budget year, she said, but the item in question requests authority to continue through fiscal year 2027.
Evelyn Davis, from the governor's budget office, said the Legislative Finance Committee had already seen and approved money for the current fiscal year, and placing items that have a later end date in HB 4 would approve their continuation after the end of the federal fiscal year.
At the meeting, Caferro said she wanted to know details as well: 'What do you plan to spend this $92 million on in the next biennium?'
At the time, Lantz said she would provide a list of how the money had been spent.
'I will say that current and future expenditures will follow federal guidelines, as it's federal funding,' Lantz said.
'I believe you,' Caferro said at the hearing.
But Caferro said this week she had not yet seen a list. The Governor's Office did not respond to an email Tuesday requesting more information about the fund.
Falk, however, said he believes the information in the memo from the Legislative Fiscal Division represents most of the available detail to date.
ARPA money has been used for a variety of expenses, including infrastructure and communications, and HB 4 includes some ongoing projects. The money is obligated but not all of it is spent yet, although it must be spent by the end of 2026.
At the meeting, Jones said it wouldn't be unusual to have an appropriation continue. He also said the bill would be in the committee for a while, and typically, three or four amendments would come up as federal grants arose that require legislative action.
In the meantime, he said, he wanted to be sure committee members received answers to all of their questions about the bill.
This week, Jones said the legislators may want to put the money toward infrastructure programs that fell short, or in a capital development fund.
He said a precise amount is difficult to estimate because ARPA funds are being spent down along the way, and interest is variable, but he expects legislators will 'suggest an appropriation of that money.'