State Budget Practice Report Cards and Budget Resource Guide

Some of Montana’s most significant sources of revenue come from its underground assets, including coal, oil, and gas. The volatility of prices for such natural resources and their impact on state income would seem to make a rainy day fund necessary to support state spending in hard times. Yet Montana was one of a handful of states without a formally established rainy day fund in fiscal 2015 through 2017, the period chosen by the Volcker Alliance for evaluations of budget practices in fiscal reserves and four other categories. The state’s lack of a rainy day fund left Montana with a D average, the second-lowest possible grade, for its handling of reserve funds over the three years.

While “rainy day fund” is often mentioned in Montana’s budget documents, the state has used its general fund balance in lieu of a rainy day fund. That is about to change, however. A 2017 law created a separate budget stabilization reserve fund and established withdrawal and replenishment policies. The law became effective July 1, 2017—the beginning of fiscal 2018. Withdrawals can begin as early as August 15, 2018, about six weeks into fiscal 2019.

Montana received better grades for its avoidance of one-time budgetary solutions to achieve balance, winning an A average in the budget maneuvers categories. It earned a B average in transparency. As with all other states except Alaska and California, it lost points for failing to disclose deferred infrastructure replacement costs.

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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 2017 Volcker Alliance report, Truth and Integrity in State Budgeting: What Is the Reality? 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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