Later, state budget director David Ewer said in a separate interview that belt-tightening likely will be the order of the day when his boss, Gov. Brian Schweitzer, proposes the budget and the 2009 Legislature sets the two-year spending plan.
Although the 2007 Legislature started with an unprecedented projected ending fund balance - or surplus - topping $1 billion, Johnson told the Legislative Finance Committee not to expect anything like that in 2009.
Ewer heard the presentation but did not speak at the committee meeting, nor was he asked any questions.
“The governor's budget will be balanced,” Ewer said. “He will not propose tax increases in his budget. We will live within our means. It may well be a session that feels like a belt-tightening session.”
Schweitzer and Ewer have been getting the same message out to K-12 schools and the university system in recent months and are letting other state agencies know, too.
“It's nothing new,” Ewer said. “We're trying to help people manage their expectations.”
Johnson predicted that legislators won't have anything near the $1 billion general fund budget surplus to work with.
While making no specific prediction, Johnson said it might be more like the current $125 million ending fund balance, plus any greater-than-anticipated revenue realized from fiscal 2008 and carried over to 2009.
But, he warned, any revenue surplus “just builds your fund balance, and it can't be used for ongoing expenses.”
While the revenue picture looks good in fiscal 2008, it doesn't look so rosy in the later years.
“I'm concerned we're going to see revenue growth somewhere in the 2 (percent) to 3 percent range,” Johnson said. “I don't see large revenue growth for 2010 and 2011.”
And that level of growth likely won't be sufficient to match the increased costs of maintaining state government operations and services at the current level, he said.
Sen. Keith Bales, R-Otter, asked Johnson if the revenue growth for the two years would likely cover the costs with what's called “present law adjustments.” These are funding increases necessary to maintain the current level of services for the next two years and, Johnson said, amounted to $360 million to $380 million for this two-year budget period.
“That is going to be real tough to maintain present law if we see some of these areas slip on the revenue side,” Johnson said.
Johnson said the revenue outlook for the current year, fiscal 2008, is “quite good.” Through Feb. 29, he said, state general fund revenue is $60.6 million more than it was a year ago.
Individual income taxes are rolling in at $47.9 million more than at the same time last year, for a 10.3 percent increase.
One red flag raised by Johnson was that state income tax refunds through Feb. 29 are $94.2 million, or $12.4 million higher than in 2007 at this time, for a growth of 13.2 percent.
More troublesome, however, are corporate income taxes. As of Feb. 29, the state had collected $74.5 million in corporate income taxes, or $21.5 million less what it received at the end of February last year for a 22.4 percent decline.
“We are definitely seeing a slippage in this particular tax source,” Johnson said.
The renewed oil industry in Montana has been one of the largest sources of increased revenue because of rising oil prices and increased production. Johnson's preliminary numbers for 2007 show total Montana oil production dropping to 33.6 million barrels from 36.3 million barrels in 2006.
More significant is the production decline from the Elm Coulee field in Richland County, the source of much of the growth in recent years, where production dropped in 2007 by 1.6 million barrels.
“This could be a start of these revenues starting to decline,” Johnson said.
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