The Daily Inter Lake

Gov. Brian Schweitzer doesn't hold back in pitching his budget proposal for the next two years, calling it "the most sustainable budget in history."

During a meeting with the Inter Lake editorial board this week, the Democrat broke down his plan for distributing an ending-fund balance, or surplus, that currently is projected at $988 million.

The governor's budget has been criticized by some as bringing about potentially unsustainable spending increases. But Schweitzer doesn't see it that way. Part of the surplus will be dedicated to programmatic spending increases, Schweitzer said, but the rest will go toward one-time spending obligations, savings and tax cuts.

His budget designates $388 million to what he considers bona fide spending increases on the state's most basic responsibilities in K-12 education, corrections and mental-health programs.

"We educate, we incarcerate and we medicate," Schweitzer said.

The portion allotted to K-12 education will amount to a 6 percent increase over current spending levels. That won't be satisfactory to some in the education community, he predicts, but those critics need to remember that K-12 education accounts for 65 percent of the state's general fund spending.

About $50 million will go to higher education to stop further tuition increases during the next two years.

"In the last 20 years, tuition has gone up every year," he said.

The state's corrections and mental health programs simply get more costly every year, Schweitzer said.

There are more inmates because of mandatory sentencing laws, as well as increasing drug and alcohol related offenses that also raise the cost of mental health programs, he said.

About $600 million of the surplus would be split, with $150 million going to tax cuts, $100 million being left as an ending fund balance, $80 million going to a "rainy-day" savings account and $100 million going into underfunded state employee pension programs.

None of those should be considered "spending," Schweitzer says. Rather, he considers them to be "savings."

"This is the most sustainable budget in history," he said.

Most of the tax-cut allotment would cover a $400 rebate proposed for homeowners, but also there would be $30 million for reducing the state's business equipment tax.

Schweitzer acknowledges that there are competing tax-cut proposals being considered in the Legislature, some of them offering property-tax reductions for homes as well as businesses.

Schweitzer maintains that the homeowner rebate is superior because that money will benefit local economies. Business tax breaks, in many cases, would leave the state, he said.

Some competing proposals claim to provide "permanent" tax relief, but Schweitzer said that's a disingenuous claim, because tax cuts could be repealed by future Legislatures.

"This is good fiscal policy," he said of his rebate plan. "It goes right back to Main Street, Montana. It's good for our economy."

The rainy-day fund would be set up so that it will be built up with unused ending-fund balances. But he proposes that it be capped at $180 million. Any balances beyond that would be dedicated to tax cuts, he said.

Schweitzer said the rainy-day fund would be put to use when the state encounters an economic downturn and deficit revenue projections.

Some people consider the state's pension-fund obligations to be discretionary, but that's not the case, Schweitzer said.

The state has a constitutional commitment to make those programs financially sound, he said.

Schweitzer proposes dedicating the remaining $170 million in the surplus to capital improvements and other projects that are typically bonded by the Legislature.

He cited a few examples that he is proposing:

. $20 million to refurbish the building in Helena that houses the state's computer system. The system has gone out of service many times in the past year.

. $14.5 million for a fund from which counties can borrow if major taxpayers protest their taxes.

. $7 million for a supercomputer developed through a partnership between Montana Tech and IBM in Butte.

. $6 million for legal services and litigation aimed at protecting Montana water rights on the Powder River and challenging the Surface Transportation Board for not adequately protecting Montana from "captive shipping" rates imposed by railroads.

. $15 million for the purchase of additional state parks and access to public lands and water.

Reporter Jim Mann may be reached at 758-4407 or by e-mail at jmann@dailyinterlake.com