More Montana money: General fund revenues increase over projections
A Montana Legislative Fiscal Division report published late last month says general fund revenues grew by 4.1% in Fiscal Year 2025, largely driven by income tax, a significant change after a previously anticipated decline of 1.7%.
While the report says “pressures” on the budget still exist, the state should enter the 2027 Legislative Session in a decent position. With a new fiscal year beginning and following worries of a 2027 legislative session filled with cuts, the better-than-expected revenue was good news for legislators.
“I’m pleased revenues came in higher than expected,” Rep. Llew Jones, R-Conrad said on Monday. “That’s that’s a good sign that Montana’s still working, and we’re still getting some higher payrolls”
Some report projections include a 4.7% flat income tax Gov. Greg Gianforte has proposed, which would decrease tax collection by $130 million per year by fiscal year 2029.
“Montana will likely enter the 2029 biennium largely structurally balanced but with a tightening margin compared to recent sessions,” the report states.
Jones echoed that on Monday, saying the state looks to be headed into the 2027 session, “structurally positive, but barely.”
What Montana is doing, from a revenue perspective, can be looked at as a “Laffer Curve,” he said, which basically says that as lawmakers raise taxes the government brings in more revenue, to a point. If they tax high-earners too harshly, they won’t come or stay in Montana and the economic theory seeks to find the optimal tax rate that spurs growth but still fills government coffers.
Jones said all you have to do is look at the types of earners coming to Montana. Even those 65 and older are still bringing wealth to the state, and tech companies, like those near Bozeman are the types of industries the state has been courting.
When asked how a flat tax might impact that, he said that’s the “challenge.”
“We have the cash flow and the Laffer effect is rarely quick,” Jones said. “It takes a little while for more people to come in and more things to occur. My preference would be to have the lowest tax possible and still have cash flow. I would hate to start down the wrong side of the curve.”
In fiscal year 2025, individual and corporate income taxes combined made up 77% of total general fund revenues. Total income claimed on tax returns in Montana grew 8.7% in 2024.
In a statement, when asked about the better-than-expected revenues, the Governor’s Office said that since taking office, Gianforte has worked with the legislature to keep “Montana’s budget growth less than the rate of inflation” and has delivered meaningful tax cuts while leading Montana to a fast-growing economy. Democrats have panned those tax cuts, saying they only impact high-earners.
“Through the governor’s leadership and focus on responsible, conservative budgeting, Montana continues to demonstrate strong revenues,” the Governor’s Office said in a statement to the Daily Montanan.
The report goes on to note trends and how potential legislative — and national — changes could impact the state’s budget.
Economically, by gross domestic product, real estate has been Montana’s largest industry for about two decades and added $12.2 billion to the state GDP in 2025. The report notes that GDP real estate contributes is larger than agricultural, mining, utilities and manufacturing combined.
In essence, the house construction and transaction industry has become one of Montana’s most important contributors to its financial wellbeing. Real estate GDP includes profits from sale of homes and land. The growth is also being driven by expensive houses.
The high-end luxury home market is centered in Madison, Gallatin, and Flathead counties. Lake County and Ravalli County also have a small share of high-value homes worth $1.5 million or more.
Madison County has 2,527 residential properties worth more than $1.5 million. Those properties have a total assessed value of $25.3 billion which, the report notes, is “more than all other counties combined.”
With the luxury home market and tourism as industries on the rise in the state, agriculture and mining have dipped. In 1950, agriculture represented nearly a third of the state’s earnings, while mining added 5.2%.
Those industries are still important to Montana, the report notes, but agriculture and mining, combined, now only represent 4.4% of the state’s economy.
“Additionally, while manufacturing earnings more than doubled in real terms from $950 million in 1950 to $2.1 billion in 2024 (in 2024 dollars), manufacturing’s share of the Montana economy shrank from 8.3% to 4%,” the report states.
State officials have also considered birth rates and migration in its economic forecast. The report notes that migration into Montana has slowed significantly — back to pre-pandemic levels — after a large rush from 2020 to 2022. Fewer than 6,000 people moved to Montana from other places in 2024, the legislative fiscal division calculated.
Montana, like the rest of the country, also has a slow birth rate. Legislative staff noted during a June 24 Legislative Finance Committee meeting, where the report was shared with legislators, that the state is aging quickly. The greying of the state will lead to more medical care utilization, they said.
Healthcare is one of the state’s fastest growing industries, staff noted in the report. More of Montanans’ income is also coming more often from places other than wages.
“Montana is higher than the nation in the share of income coming from investments, which includes dividends, rent payments, and gains from the sale of investments including residential property,” the report states. “The gains in this category can also partially be explained by Montana’s population aging, as individuals tend to build up assets as they age, but it also suggests a higher average wealth level than in the past.”
The report estimates the Montana Department of Public Health and Human Services will need an additional $211 million — on top of current funding — for the 2029 biennium to meet “present law,” which is essentially how much the agency would need to continue operations as they are now.
It also includes inflation, Jones said and “spending pressures” are also included in the report, which are things agencies might want the Montana Legislature to fund, but don’t necessarily have the money to do that.
This includes $34.9 million for contract labor at Montana State Hospital, money that was cut out late in the 2025 Legislative session. The report also estimates that $63.9 million will be needed for “traditional and expanded Medicaid caseload adjustments” and an additional $54.4 million for adjustments made to “federal match rate.”
DPHHS has expressed frustration about the legislature’s actions last session that left them with a hole in their budget. In an effort to close that, the state canceled a planned 3% provider increase.
Some legislators, including Helena Democratic Rep. Mary Caferro — a longtime defender of Medicaid — believes that with the better-than-expected revenues, a “surplus,” she called it, that the money is there to preserve the provider increase.
“It begs the question, why are they cutting Medicaid provider rates? I mean, if you don’t have the providers to deliver the services that people need, then you’re basically cutting services to people,” Caferro said Monday. “What is their reason? They cannot use the excuse that there isn’t enough money. That is just total baloney.”
Sen. Laura Smith, D-Helena, said the expected revenues mean the money is there.
“There are no excuses for cutting individuals’ health care,” Smith said. “There is enough money. There is a question of political will by this governor’s administration.”
Stricter federal regulations around error rate in the Supplemental Nutrition Assistance Program are also factored in. The report says Montana will need nearly $50 million more to cover changes related to SNAP in President Donald Trump’s “big, beautiful” budget bill, which he urged the Republican-controlled Congress to pass and which he signed just a little more than a year ago, on July 4, 2025.
