Gov. Brian Schweitzer says Montana is heading for an economic rebound, and he refutes gloomy projections for the next biennium because he intends to restrain state spending.

There has been an ongoing disparity between the governor’s administration and the Legislative Fiscal Division over the state’s financial future, and Schweitzer addressed those differences in a meeting with the Daily Inter Lake editorial board Thursday.

Schweitzer challenges a forecast that the state faces a $400 million shortfall over the next two years, primarily because Montana currently has $340 million “in the bank” and because the forecast assumes that state spending will increase by $300 million.

“They’ve decided we’re going to increase spending by $300 million over the next biennium,” Schweitzer said. “I reject that. That isn’t what the (Legislative Fiscal Division) does.”

Schweitzer said he and the Legislature will determine any spending increases and his budget proposal, to be released on Nov. 15, will maintain state services and will not include any tax increases.

The Legislative Fiscal Division has underestimated revenue by substantial margins during the last three legislative sessions, Schweitzer said, but even if the forecast for a downturn over the next two years is correct, he is confident the state will stay in the black.

“Thank God we have $340 million in the bank,” he said.

Schweitzer said state coffers will benefit from increased oil, gas, coal and precious metals production, along with a bumper wheat crop.

“Things are starting to move ... things are going to turn around,” Schweitzer said.

On the spending side, Schweitzer said his administration is developing plans to curb costs in Medicaid through managed care and by reducing options and benefits. Montana’s Medicaid program expenses currently exceed those of most other states, and Schweitzer said he intends to bring those costs in line.

The governor has long advocated the ability of Montanans to purchase prescription medications at Canadian prices, but he has been stymied by the federal government. He is currently applying for a waiver from the Food and Drug Administraton that would provide for cheaper Medicaid prescriptions, and he believes it would save the federal government $200 million to $400 million in its cost share to the state.

Holding the line on state spending will present other challenges for Schweitzer and the Legislature.

The Montana Education Association has firmly stated that it will insist on pay increases for union members, but Schweitzer says that is something that “will just have to be hammered out.”

Under court order and with more favorable economic conditions, the state ramped up K-12 per-student spending from $3,500 to $4,500 since 2005. Schweitzer likened it to investing in a new pickup and a roof for the barn, but said the state must now be concerned with simply maintaining fences on the ranch.