It should come as no surprise to those who follow Montana politics that outgoing state senator and GOP mouthpiece Fred Thomas (R-Stevensville) would express shock and dismay at District Judge Jeffrey Sherlock’s recent ruling that found the state’s current education funding scheme unconstitutional and “defenseless.” After all, Thomas is the guy who sponsored the state’s ill-fated leap into electricity deregulation and is still trying to defend that looney idea as a success. But Thomas’ inability to grasp reality has little to do with how the state will deal with the education funding problem. For that, we’re going to have to turn to people who are willing to knuckle down, face the facts and get real about solutions.
While Thomas may be shocked, it’s safe to say that Sherlock’s ruling came as absolutely no surprise to the education community. For years now, state educators have been going before legislative committees and warning them that the continued slide in the state share of educational funding was going to land them in court. The state used to contribute 71 percent of education funding in 1991, but a decade of Republican rule has slashed the state’s share to 60 percent. The rest, as every homeowner knows, is being picked up by our ever-rising property tax bills.
This tax-shifting happened primarily because Republican-controlled legislatures made intentional decisions to slide more of the tax burden off of business and onto the backs of citizens. In that regard, the Republicans were successful. The problem, as we now see, is that their tax-shifting shenanigans have come back, as our colloquial governor would say, “to bite us in the behind.”
To be fair, the idea to “improve Montana’s business climate” by slashing business taxes did not come from Republicans only. Those with long memories will recall Democrat Gov. Ted Schwinden’s “Window of Opportunity” in the mid-’80s. If only Montana slashed its Coal Severance Tax in half, reasoned Schwinden, we would be more competitive with Wyoming coal and create such an upsurge in coal production that the tax cut would be more than offset by the increased tonnage and the new jobs it would create.
As we now know, Schwinden’s plan reduced revenues for both the Coal Trust Fund and the general government budget, but somehow it failed to produce the predicted tidal wave of new jobs, increased production, and revenue.
Unfortunately, Schwinden’s bad idea didn’t end when he left the governor’s office to be replaced by Republican Stan Stephens in 1989. Instead, Stephens and his gubernatorial successors Racicot and Martz went on a business tax-cutting binge, giving away hundreds of millions in lost revenue as they futilely attempted, time and time again, to “jump-start” Montana’s economy.
Last session, in what may have been the apogee of this “give it all away for free” idiocy, the governor and Legislature appropriated $300,000 in state money to do the preliminary development work on the Otter Creek coal deposits on land the state acquired from the federal government in a settlement to stop a gold mine on Yellowstone Park’s borders. Prior to that time, however, any company could have developed the deposits. But they didn’t. Even the head of the industry’s Coal Council said the state should have taken the $10 million the feds offered instead of the coal.
What does all this have to do with the school funding lawsuit? Simple. Somewhere, somehow, the state is going to have to come up with about $300 million in new education funding annually to meet the constitutional requirement for quality education.
Freddie Thomas is quick to blame the judge for “a gigantic tax increase.” According to Thomas, coming up with the money will mean increasing income taxes by 60 percent, increasing vehicle taxes by 447 percent, or raising corporate taxes by 507 percent—none of which is likely to happen.
There are some alternatives, however, that may be worth considering. Given that those who are driving the state by looking in the rear view mirror are convinced that Montana’s future lies with the same resource extraction industries of our past, perhaps it’s time to re-examine the tax policies associated with those highly flaunted extractive industries.
We could surely start with restoring our coal severance tax to its former level. Sure, there will be gnashing of teeth over how this will put Montana at a “competitive disadvantage” in the race to deplete our natural resources, but there will likely be no hard proof that we will lose any business because of this—just more of the same “give away” rhetoric that got us here in the first place.
And all that energy development Bush, Burns, Martz and their cohorts think is so critical to Montana’s role as a national energy colony provides yet another option. Last session there was a bill to place a hefty surcharge on energy shipped out of Montana. Needless to say, it was killed immediately. Once again, however, we should ask why it makes sense to send the power out of state and be stuck with the pollution in-state without just compensation? Given the plans for 30,000 new coalbed methane wells that may create long-term damage to both surface and groundwater in central and eastern Montana, why wouldn’t we want to make the costs commensurate with the profits to be reaped by out-of-state corporations and the risks they leave behind for Montana residents?
Guys like Thomas and his cohorts will try to scare us into believing that the only source of revenue to meet the school funding mandate is the wallet of Montanans. But that’s because they believe in shifting the tax burden onto citizens.
Instead, those who would lead our state should suck it up, admit that the giveaways and tax-shifting of the past haven’t worked as predicted, and revisit our natural resource taxation policies. The time has come to pull our head out of the sand, face reality, and make some smart decisions for a change.
When not lobbying the Montana Legislature, George Ochenski is rattling the cage of the political establishment as a political analyst for the Independent. Contact Ochenski at email@example.com.