Canard in a coal trust

Martz' bogus budget will bounce like a bad check



Although required by law to prepare and release her budget on Nov. 15, Governor Martz has come in a few days late of meeting the statutory deadline and about $100 million short of meeting the Constitutional mandate of a balanced budget. It would be great if it was worth the wait, but like much of what we’ve seen from Martz so far, it should come as no surprise that the budget is bogus, too.

I say “a few days late” because it was still not possible to acquire the publication containing the Governor’s budget when this column was written. It was “released” not by actually producing the books for public and legislative review, but by posting it on the internet.

The tardy release of the budget publication is nothing, however, compared to the method Martz used to “balance” the budget. In what is likely to be acknowledged as one of the most lame, unimaginative, and doomed moves of recent times, Martz includes a $93 million raid on the Coal Tax Trust to “balance” income with spending.

For those unfamiliar with the history of the Coal Tax Trust, a quick review might prove useful. Back in 1972, when the state’s new Constitution was written by far-sighted individuals, Article IX addressed the issues of the environment and natural resources and contains a host of provisions for which future generations owe unlimited gratitude to the drafters. The mandate for “a clean and healthful environment,” and that “all lands disturbed by the taking of natural resources shall be reclaimed” lead the way, followed by the establishment of the Resource Indemnity Trust. Funded by a small tax on the “extraction of natural resources” this trust has nearly reached its cap of $100 million and provides millions of dollars in interest earnings that are used for reclamation every year.

Based on the principle that Montanans should put something aside for the future, when the non-renewable resources are gone, the Coal Severance Tax Trust Fund was established in Section 5 and mandates that from 1980 onward, “at least 50% of the severance tax shall be dedicated to the trust fund.” Further—and this is the provision that makes Martz’s use of this money so phony—the Constitution declares unambiguously that “The principal of the trust shall forever remain inviolate unless appropriated by vote of three-fourths (3/4) of the members of each house of the legislature.”

The desire that the Trust remain “forever inviolate” has been realized only because of the nearly impossible-to-get “three-fourths vote” requirement. In the generation since the Trust was established, Montana has seen some very rocky fiscal times. For instance, Montana used to have an educational trust fund, but because it wasn’t protected by a three-fourths vote requirement, it was sucked dry during the ’80s. Did the kids of the ’80s need education more than the kids of today? Probably not, but the lesson is clear that once a trust is tapped, its days are numbered.

The Coal Tax Trust has not remained intact by virtue of no one going after it. Quite the contrary, actually. Almost every session there have been attempts to crack the Trust for one purpose or another, but only once was expenditure of the Trust principal authorized, and even then, no funds were lost because the project it was supposed to help fund turned out to be unfeasible.

Astoundingly, it has usually been the Republicans who have sought to bust the Trust—albeit they came closest when helped by a cluster of old Butte Democrats who have since been termed out of the legislature or died. It seems strange that the Republicans, who have run literally every one of their campaigns in the state on a platform of fiscal responsibility, would want to bust the Trust since, in virtually every way possible, the Coal Tax Trust is the fiscal backbone of Montana.

Because of the Trust, and the $600 million it has been able to accumulate over a generation, our state is able to obtain bonding for much lower interest rates than would be possible if we lived “hand to mouth.” Obviously, having the money in the bank to back up our borrowing makes Montana much less of a risk for the loans. Without the trust, the cost of virtually all future state bonding will go up. Want to build a new dorm at the university? It’s gonna cost more. And because the legislature is unlikely to spring for the extra money, guess where it will come from? Can you say “tuition”? Sure you can.

Plus, the Trust annually produces close to $38 million in interest that flows directly to Montana’s budget. This is non-tax money, generated by the principal of the Trust. If you reduce that principal by $100 million, of course you also reduce the interest earnings of the Trust, which will then require more tax-generated revenue to fill the void. Under Martz’s plan, not only would they rip off the Trust, it wouldn’t even be a loan—there would be no interest paid and the state would “make the Trust whole” sometime in the indefinite future when revenue exceeds expenses. Can you say “pipe dream”? Sure you can.

In short, Martz’s budget is a sorry excuse for fiscally-responsible leadership. Thanks to the unrealistic spending and tax giveaways of the Racicot and Martz administrations, Montana is teetering on the brink of fiscal collapse. Issuing a budget that requires a $100 million rip-off from the Coal Tax Trust should once and for all dispel the Republican rhetoric of fiscal responsibility.

Martz and her cohorts continually claim, “government should be run like a business.” Sticking with their analogy, Governor Martz is now acting just like a corporate CEO who has exhausted her bag of accounting tricks and is going after the employee pension funds. Adding insult to injury, the budget for the Governor’s Office goes up while environmental enforcement gets cut and our future gets robbed.

When not lobbying the Montana Legislature, George Ochenski is rattling the cage of the political establishment as a political analyst for the Missoula Independent.


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