The 2011 Legislature adjourned the evening of April 28th after 88 days of conflict and controversy, with the fate of many important bills still to be decided by the Governor.

This is a short story about a long winter — a curious tale of good and bad ideas, opportunities missed, calamities avoided and decisions — right or wrong — that will determine how cities and towns will balance budgets, fund capital projects and manage operations for the next two years.

As the Legislature convened in January, it faced a budget deficit that was estimated at more the $300-million — the deepest financial hole in the history of the state. The deficit question was part of almost every discussion this winter and the answer that came in the final days fell somewhere between two extremes: deep and dangerous cuts in programs and services or the hope that things were not as bad as they seemed. As usual, the majority found the road home somewhere between the edges of the broad and jagged differences that now define politics in Montana.

Analysis by Issue

Revenue and Finance

League members decided in Butte last fall that defense of the Entitlement Program should be the principal objective of the 2011 lobbying strategy.

House Bill 495 ices entitlement distributions through the next biennium and establishes a new method of calculating the growth factor in subsequent years.   The growth rates under the old law would have been nearly 5% in the next two fiscal years.  From the beginning it was obvious that the Legislature was not going to increase local distributions while cutting general fund spending by 6%.  The flat line solution will cost cities and counties about $12 million in revenues they would have received under the old law, but it is better to stay even than to take the reductions that were applied to most public agency budgets.  Beginning in 2013, the bill will base entitlement growth rates on personal and corporate income tax revenues and collections of those funding sources that were transferred to the state in 2001.  The adjustment will be based on a two-year average, which will make the formula more responsive.  More importantly, by the time the new formula is applied, the worst years of the recession will be removed from the calculation.

The new formula comes with a floor and a ceiling.  The growth rate cannot go below zero while increases are limited to 3% for counties, 3.25% for consolidated governments and 3.5% for cities and towns.  The Executive Budget Office estimates entitlement growth rates of 3.28% in the two fiscal years beginning July 1, 2013.

House Bill 351 will cover about 90% of the water, sewer, solid waste and bridge projects that applied for funding under the Treasure State Endowment Program.  The Governor proposed suspending grant awards for two years, but  that bill was killed because a majority of the Legislature seemed to understand the value of these projects to cities, counties, special districts and the people back home who pay water and sewer rates and bridge levies.  The bill also includes a provision that limits bridges to 20% of total funding in future application cycles.  There was a lot of discussion about jobs throughout the winter.  The endowment funds are generally leveraged by a factor of 4, which means that HB-351 will add more than $60-million and about 1,500 jobs to the Montana economy.

House Bill 610 proved once more of the wisdom of the ragged old adage that “no man’s money is safe while the Legislature is in session”.  This bill would have allowed the Department of Environmental Quality to jack up the fee it applies to public water systems from $2 to $7 per connection.  It was intended to reduce pressure on the state budget by transferring costs to local rate payers.  This shell game was busted and the bill was killed.

House Bill 316 would have transferred revenues in dedicated accounts to the state as part of the general plan to balance the budget.  The introduced version of the bill would have pilfered license fee revenue from live gambling and video machines from cities and towns.  The Legislature removed this provision and sent the bill to the Governor who vetoed it with a branding iron on the front steps of the Capitol.

House Bill 122 as introduced would have increased employer contributions to the state retirement funds as a first step toward working down the unfunded liabilities in these accounts.  The version of the bill that was finally approved makes adjustments in retirement age and other provisions of the retirement act for employees hired after the effective date.

House Bill 197 proposed a referendum to amend the Constitution to allow the Legislature to adjust benefits for current members of the retirement system.  The bill was tabled in the House State Administration Committee.

House Bill 211 would have extended the payment period on judgment levies from 3 to 10 years by allowing cities to issue bonds for this purpose without a vote.   The bill passed Second Reading in the House by a 100 to 0, but it got tangled up in the suspicion about public debt in the Senate and was rejected.

House Bill 317 will sunset statutory appropriations.  This means that gas tax and entitlement share allocations and other appropriations that do not require Legislative approval will be reviewed periodically.

House Bill 400 would have prohibited local governments from charging fees for emergency medical services provided to victims of car accidents.  The bill was tabled in the House Local Government Committee after a quick hearing and a short debate.

House Bill 604 will transfer about $20 million from special revenue accounts to the general fund.  These transfers were the last piece of the budget puzzle and they were approved in the final hours of the Legislature.  An estimated $12 million of the total amount transferred comes from the Oil and Gas Commission Conservation Account, but this move was apparently nullified by the Governor’s veto of HB-316.

Senate Bill 372 will reduce the property tax rate on business equipment from 3% to 2% and provide full reimbursement to local governments and schools for lost revenues.  The Senate version of the bill only covered 90% of the cost of full reimbursement.  The House Taxation Committee bought the argument that there is no reason to stop in Anaconda when you are on your way to Butte, and kicked the number up to 100%.  The cost of reimbursing local governments and schools is estimated at more than $22-million annually.  This bill comes with all the promises that have been made in the past, but there is no guarantee or even reasonable assurance that these payments will not be phased out or terminated the next time there is a whistling hole in the state budget.

House Bill 2 is the general appropriations.  It is the bloody shirt that tells the tale of the great battles to allocate more than $3-billion every two years among vigorously competitive and equally deserving interests.   There were two elements of House Bill 2 that were of particular interest to cities and towns in 2011: the Main Street program was included in the budget and will continue for another two years while the money for the Local Government Center in Bozeman was not appropriated.

Water Quality and Utility Services

Legislators introduced numerous bills in 2011 to generally improve the operation and control the costs of municipal water and sewer service.  Cities supported these bills with the belief that they represented progress in the work to put together a water quality regulatory regime that is affordable, feasible and fair.

House Bill 28 will require that septic mixing zones for subdivisions may not extend beyond property boundaries without easements from adjacent landowners.

House Bill 52 will set up the procedures to authorize the reuse of municipal wastewater.  This could be an important element in a comprehensive strategy to control the costs of complying with effluent limits by reducing direct discharge into Montana waters.

Senate Bill 367 sets up a general nutrient standards variance system. The bill recognizes that treatment to base numeric nutrient standards “will result in substantial and widespread economic impacts on a statewide basis”.   The general variances for larger cities are set at 1 milligram of total phosphorous and 10 milligrams of total nitrogen per liter.  For systems treating less than 1 million gallons per day the variance will be 2 milligrams of total phosphorous and 15 milligrams of total nitrogen per liter.  These standards do not apply to lagoons, and it is assumed that most mechanical systems can qualify for the general variances provided by the act.

House Bill 62 repeals a forgotten section of law that allowed 15 utility customers to petition the Public Service Commission for a review of a municipal sewer system rates.   The old law was not stricken as it should have been when municipal utilities were deregulated in 1981.

House Bill 162 would have prohibited wastewater mixing zones for all public wastewater systems.  The fiscal note on a similar bill from 2009 estimated the costs in multiples of a billion dollars.  The bill, which was more of a political message than a serious proposition, was killed in the House Natural Resources Committee.

House Bill 352 will allow for the use of bottled water to allow public systems to comply with nitrate limits.

Senate Bill 87 clarifies that the state can forgive payments on water and sewer revolving fund loans if authorized by the federal government.

Senate Bill 234 provides that cities can no longer provide exclusive solid waste service in newly annexed areas.  The bill erased the requirement that cities must wait five years to provide service in new areas and provides for full competition on the date of annexation.


Police, Fire and Courts

House Bill 231 would have allowed First Class Cities to supplement their paid firefighters with volunteers.  The large cities were divided on this bill.  Some supported it while others were opposed.  It was tabled in the Senate Local Government Committee after passing the House.

House Bill 346 would have allowed the trustees of a Fire Relief Association to exceed the $225 per month cap on payments if the pension fund was financially sound.  The bill passed the House but was tabled in the Senate because of a general concern about deficits in public pension programs.

House Bill 505 would have established a presumption for firefighters that heart and lung disease, cancer and other conditions were job related and covered by Workers Compensation.  Similar measures have been introduced several times in recent sessions and this issue will continue to be a high priority for professional firefighters.

Senate Bill 41 allows cities to establish courts of record.  The purpose of the measure is to cut down on the number of cases that are appealed in city courts.

Senate Bill 82 would have made failure to wear a seat belt a primary offense.  Opponents argued that the bill was an affront to personal liberty and responsibility and it was tabled in the Senate Highways and Transportation Committee.

Senate Bill 222 strikes the age limit for professional firefighters. Courts have ruled that the law that banned a person over 34 years of age to be hired as a firefighter was unconstitutional.  This bill brought the law and these court decisions into alignment.

House Bill 271 would have allowed some people to carry a concealed weapon inside city limits without a permit.  The Governor vetoed this bill. 

Senate Bill 423 was the final iteration of a long list of measures to either regulate the use of medical marijuana or repeal the law that was passed by initiative several years ago.  The Governor has said that he will let SB-423 become law without his signature, but opponents are lining up legal challenges and initiative campaigns to get rid of most of the provisions of this bill.  This is a difficult issue, and it is unfortunate that the Legislature did not get behind a medical marijuana bill that was written by an interim committee with help from local governments, medical professionals, caregivers, patients and others committed to a workable solution.

Senate Bill 150 was probably the most dangerous bill introduced in the 2011 session.  This bill would have removed indemnification protection for most public employees accused of violating a person’s constitutional rights.  The proposed law would have applied to a wide range of decisions, including planning, zoning, public notice, arrests, searches and other police actions.  Nobody ever got rich working for the government, but a lot of state and local government employees could have been bankrupted in a flash if this bill had passed.

Senate Bill 345 was another attempt by a first-term Senator to put something in the Federal Constitution that was probably never intended.  This bill would have awarded attorney fees to the prevailing party in a constitutional case.  The Senate Local Government Committee tabled the bill.

Land Use and Community Development

In many recent sessions of the Legislature, the Local Government Committees spent most of their time trying to sort out what seemed like an endless procession of subdivision, planning, zoning and other bills included in the land use category.  This was a big group again in 2011, but there were fewer bills and less controversy.  Most of the work in the area of community development was related to Tax Increment Financing and Special Districts.

House Bill 304 would have essentially repealed a comprehensive revision of the Special District Law that was passed by the 2009 Legislature after a very thorough interim study of this issue.  The bill was introduced in response to the adoption of recreation and street maintenance districts in Missoula.  The measure was tabled by a 17-3 vote in the House Local Government Committee.  It then got out onto the House floor on a procedural motion where it was rejected by a 76-24 count.  Another bill inserted an administrative appeal that was omitted from the 2009 Act.

House Bill 575 was supposedly introduced to correct a problem under the Annexation with the Provision of Services sections of the state codes.  This law, also known as the Planned Community Development Act, includes a provision that bans the annexation of territory served by a rural fire district.  The purpose of the bill was to correct this problem, but it went well beyond the original intent because of confusion over the cross-referencing section of the annexation laws.  In the end, the bill, as amended, fixed the Planned Community Development Act, maintained the integrity of other sections and added a provision that allows cities to annex wholly surrounded industrial property at the request of the owner.

House Bill 542 would have changed the rules under which local governments review subdivisions and bent the standards to the advantage of developers.  The bill was vetoed by the Governor.  He also vetoed Senate Bill 183 that would have prohibited counties from setting up interim zoning districts.

Senate Bill 344 was the so called “Montana Property Fairness Act” which is a nice way to describe a bill that would have stacked the deck against public agencies on most land use decisions.  These “takings” measures have been introduced in every session of the Legislature for the past 10 years.   They encourage lawsuits against local governments and state regulatory agencies, and a similar law that was enacted by initiative in Oregon was repealed after 8,000 claims were filed in two years.  The bill was tabled in the Senate Judiciary Committee.

House Bills 560, 561 and 562 are generally innocuous revisions to the Tax Increment statutes to encourage higher levels of public understanding and participation in the creation and operation of these districts.  Senate Bill 358 is another TIF bill.  It passed the Legislature but was vetoed by the Governor.

House Bill 426 revises the laws for the formation of new cities and towns to protect the most profitable corporation in the world and the Yellowstone County Road Fund.  The bill bans the inclusion of refineries, smelters, electrical generation plants and large agricultural tracts in an incorporation plan without the consent of the property owner.

Senate Bill 117 would have required local governments to demand coordination with federal agencies on land use and wildlife policies.   The real purpose of the measure was not evident, because authority in this country seems to come from the top down, not in the other direction as purported by the supporters of SB-117.   The House Local Government Committee tabled the bill.

House Bill 516 would have retroactively repealed an ordinance passed last year by Missoula to protect gays and lesbians from discrimination.  The bill would also have banned all local governments from passing similar ordinances in the future.  The House passed this bill, but the Senate let it die quietly at the end of the session.  

(Posted 05/23/2011)