Montana tax collections higher than expected

HELENA, Mont. (AP) -- Montana tax collections through the end of May have exceeded expectations, with revenue up 11 percent, but state spending is expected to jump more than 14 percent over the next budget cycle, fiscal analysts said Tuesday.

The state's bottom line is projected to be healthy, with a surplus of about $300 million forecast for 2015.

State revenue was nearly $1.8 billion with less than a month left in the fiscal year, which is $174 million more than this time last year, legislative fiscal analyst Amy Carlson said.

"The bottom line is, it looks strong, it looks good. It is good news," she told members of the Legislative Finance Committee.

The main drivers in the rosy economic report are increases in individual income tax collections, which were up 15.3 percent to just over $1 billion, and corporate license tax collections, which were up nearly 37 percent to $156 million.

But those increases will be tempered by a nearly $523 million general-fund spending increase over the next two years, analysts said. A quarter of that increase — more than $126 million — will go to pay for pension legislation passed in the recently ended session.

Another quarter of the increased spending is for education, though a big chunk of that comes from switching the source of some education funding from a special account to the state's general fund.

Tax refunds, the university system and Medicaid and health services make up the rest of the spending increases.

Senate Minority Leader Jon Sesso, D-Butte, said the pension payments are unavoidable, while the tax relief is a one-time payment and switching the education funding source is not really an increase in spending. The spending growth is actually about 7 percent when those other payments are disregarded, he said.

"The spending is well in line with the revenues that are coming in," he said.

Analyst Stephanie Morrison said it isn't entirely clear why income tax collections are so much higher, but she speculated more people paid capital gains taxes this budget year from selling assets due to uncertainty in the federal tax policy.

The difference in corporate tax collections is in part due to an unusually large amount in refunds given to five corporations in 2012, and a one-time tax payment from a corporation that reorganized this year as a limited liability company, analysts said.

Tax collections for property, vehicles, insurance and video gaming also rose from a year ago.

On the down side, oil and gas production tax collections have dropped 8.5 percent to $47 million, as the state's share of newly drilled wells that produce oil declined for the second year.

Those seven taxes — income, property, corporate licenses, oil severance, vehicles, insurance and video gaming — make up 80 percent of the state's general-fund revenue.