Even in the worst case scenario, Montana will avoid a budget deficit.  That was the message of Governor Brian Schweitzer (D-MT) Wednesday, as he cited high commodity prices, particularly wheat, along with coal and oil production as reasons why Montana's budget revenues will be stronger than some forecasters are predicting. 

Here's what he had to say during a press conference at MSU-Billings:

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Schweitzer continued to tout Montana's placement as one of only two states without a current deficit, even as the state's Principal Fiscal Analyst Terry Johnson is forecasting a potential $400 million deficit in the years ahead.  

Here's what Johnson  told The Billings Gazette's Tom Lutey:

Using current cash reserves would only be a one-time remedy, said Terry Johnson, senior fiscal analyst for the Legislature. Once the reserves were spent, the state would still be faced with spending more money on government services than it’s bringing in.

Johnson, who was in Billings speaking to the Montana Petroleum Association about the budget picture, said nothing has changed since his division predicted a $400 million budget shortfall. The gap will have to be closed through spending cuts or tax increases. 

While the Governor painted a rosy picture for the state budget, it isn't rosy enough for him to reconsider a pay freeze for state employees.  

Given the strong commodity prices, and hopes that Montana may see an oil boom in 2011 similar to that which has been seen in North Dakota, I asked Governor Schweitzer if this means he can now take another look at the proposed state employee pay freeze.  Here's what he had to say: 

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Even with the high wheat prices, combined with strong crops, the Montana Farm Bureau's John Youngberg told the Gazette that won't be enough for the state to avoid a deficit.   

“It will have an effect. It does have an effect, but it won’t have a $400 million effect,” said John Youngberg, Montana Farm Bureau vice president of governmental affairs. “You’ve got about $2 billion in ag stuff, that would be both livestock and grains. If you look at the profits on that and what everybody has to spend, let’s say you’re left with 50 percent profit. You will not be able to tax people enough to get $400 million out of that.”

Meanwhile, the head of the MEA-MFT which represents teachers and other state employees says they will fight hard against a proposed pay freeze, and hopes to broker a deal with the Governor ahead of the legislative session.  How hard will the Governor fight the MEA-MFT over the pay freeze for state employees?  "As you know, I'm not much a fighter, I'm more of a lover," the Governor told me.  "So, we'll try and romance everyone into place."   

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