Governor proposes tax cuts, education funding increases in budget

Gov. Brian Schweitzer is proposing tax relief and big increases in education spending, including plans for full-day kindergarten and a promise to hold college tuition at current levels, in his new budget.

The governor's two-year budget proposes roughly $400 million in new ongoing spending, $500 million in one-time initiatives such as a $400-per-homeowner tax rebate, and a roughly $80 million rainy day savings account.

It goes to the 2007 Legislature, nearly divided between Republicans and Democrats. The governor predicted some negotiating will take place.

Republicans said they saw hope for reaching common ground in some areas, but were leery about the overall spending increases proposed in the budget.

Schweitzer said he will "listen to good ideas," and added that the only initiative off limits to legislative tinkering is a proposed $1.8 billion cap on spending of state money.

"These are all critical needs," he said. "I am not going to pick and choose which are the most important."

Initiatives proposed by the governor include:

$100 million in property tax rebate checks, a $30 million cut to the business and equipment tax that Republicans had hoped to abolish altogether, and $20 million to suspend the so-called water tax for holders of water rights.

$230 million more for K-12 education.

A $100 million infusion into a state pension system facing a projected $1.4 billion shortfall. He also wants to cut benefits for new employees to ease the burden on taxpayers.

The governor agreed with a prediction by lawmakers that they will have nearly $1 billion in excess revenue to work with for the budget that covers July 2007 through June 2009.

Schweitzer said the state is seeing unprecedented economic growth, and believes his budget wisely places a ban on any bonding and sets a little aside to ease the pain of future busts.

State Sen. Corey Stapleton, R-Billings, said Republicans want the property tax relief to be permanent and proportional to the amount of taxes paid, rather than doled out as a $400-per-person rebate.

"I thought it was encouraging," Stapleton said of the budget. "It seemed like he would be open to our permanent property tax relief."

A college tuition freeze or reduction, a rollback of the water tax, and some sort of property tax relief all have a good chance, he said.

Stapleton guessed the budget represents year-over-year spending increases in excess of 10 percent.

The governor, at an afternoon news conference, said he did not know how much the budget increased overall spending.

"I though it was interesting he didn't know the percentage increase," Stapleton said.

The governor's budget also shows that an agreement has been reached with the union representing state workers for $100 million worth of benefit increases, including a 3 percent base salary hike.

Stapleton said the governor should not have made that agreement behind closed doors.

The governor's budget also includes plans to upgrade the state computer system, put more money into mental health programs, purchase land for fishing and recreation access, and improve the corrections system.

"In this budget, we have said this is the road map for the future of Montana," Schweitzer said.