State Budget Practice Report Cards and Budget Resource Guide

Montana’s establishment in fiscal 2017 of the Budget Stabilization Reserve Fund—a critical buffer for a state dependent on volatile revenues from oil, gas, and coal production—helped overcome earlier underperformance in the reserve funds category and allowed it to earn a C average for 2015 through 2019. The legislation that established the fund includes procedures for replenishment when revenues exceed estimates and for withdrawals, primarily for revenue shortfalls. The fund held $60 million in 2019, equivalent to 2.5 percent of general fund expenditures.

Montana’s lowest average grade was D, the second-lowest mark, in budget forecasting. The state does not use a consensus revenue forecast, depending instead on estimates prepared by the legislature’s bipartisan Revenue Interim Committee. Montana’s budget projections extend only two years beyond the biennial budget, not the three considered a best practice in revenue estimating. 

In legacy costs, which include public worker pensions and other postemployment benefits (OPEB), primarily health care, the state averaged a C. Montana provides funding for its pension in line with the actuarially determined amount, and its 73 percent funding ratio was 2 percentage points above the total for all states in 2019. But the state does not fund OPEB in line with actuaries’ recommendations, paying for it instead on a pay-as-you-go basis.

Montana received B averages in budget maneuvers and transparency. It mostly avoided one-time measures to achieve balance, although it did depend on savings in its general fund balance and use a limited number of special fund transfers to support general fund spending in 2016–18.

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To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.

The report cards presented here are taken from the 2021 Volcker Alliance report, Truth and Integrity in State Budgeting: Preparing for the Storm, which proposes a set of best practices for policymakers. For those wishing to gain greater insight into state fiscal issues, the accompanying budget resource guide is derived from the Alliance publication State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses (2016). 

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