Friday, April 12, 2024

Analysis says county could get $368k for roads if SB 442 veto overridden

by By BLAIR MILLER Daily Montanan
| March 26, 2024 7:00 AM

With the question of whether to override Gov. Greg Gianforte’s veto of Senate Bill 442 now in the hands of lawmakers, a report published this week by a Legislative Services Division research analyst details how most of the state’s counties would stand to get tens, or hundreds, of thousands of dollars to maintain their county roads if the override is successful.

The Montana Supreme Court will have the ultimate say if whether Gianforte’s veto of the broadly supported bill that redistributes the state’s marijuana revenue to send more toward county roads and a legacy conservation program was done properly, since the state has filed a notice of an appeal of a Lewis and Clark County District Court decision.

But if the override poll is successful and the court upholds the lower court opinion saying lawmakers needed the chance to override the veto, the analysis shows how the county roads maintenance portion of more than $50 million in annual marijuana tax revenue will be distributed to all 56 counties, including the ones that don’t allow for recreational marijuana sales.

“If the veto override should prevail, SB 442 could go into effect, changing the distribution of marijuana tax revenue, starting with the 2024 fiscal year. What that actually means, though, deserves a little more explanation,” wrote research analyst Erin Sullivan, who is also the lead staffer for the Economic Affairs Interim Committee.

Analysis estimates about $16 million annually would go toward county roads

The bulk of that General Fund money, about $16.6 million, according to Sullivan’s estimate, would go directly toward the county road fund, then be distributed to the Department of Transportation. The DOT will hand the money out to each county based on a formula that accounts for the number of rural road miles, state and federal land area, and block management acres in each – with an emphases on the share of the rural road mileage in each county compared to the total rural road mileage in Montana.

“The revenue deposited into the County Roads fund first goes into three buckets: Rural Roads, Block Management Acres, and Federal and Trust Acres,” the report says. “Half of the revenue is deposited into the Rural Roads bucket, and 25% each into the Block Management Acres and Federal and Trust Acres buckets.”

Montana’s 56 counties are split 50-50 as to whether they allow adult-use marijuana sales. The more rural and less populated counties largely account for the 28 counties that don’t allow for adult-use sales.

But those counties also stand to see the largest comparative shares of money going toward their road maintenance compared to the lack of, or relatively small amounts, of revenue they bring in with just medical sales if the SB 442 veto is overridden and the court’s decision upheld, according to the report.

Rural counties stand to see biggest boost for roads

Among 22 counties that contribute zero tax revenue, allocations range from 0.5% of the county road money for Wibaux County up to 3.9% for Phillips County. Most counties that don’t contribute marijuana tax revenue will see around 1-2% of the county road funding.

But even 0.5% of the total road money would mean an estimated $55,312 for county roads annually for Wibaux County, according to the report, and many of those counties would see more than $100,000 a year. Phillips County, home to Lang, would get an estimated $406,134 each year if SB 442 was law, according to the report.

The biggest boost to county roads would be in Flathead County, which stands to receive $492,950 a year, according to the report, but Valley ($389,000), Beaverhead ($393,000), Lincoln ($368,000) and Blaine ($306,000) would all stand to get more than $300,000 a year.

Most of the rest of the counties in the state would stand to receive between $120,000 and $300,000, according to the report.

Among the counties that do allow adult-use marijuana sales, they would receive distributions ranging from 0.6% of the county road fund in Silver Bow County to 4.7% of the share in Flathead County.

“If the override does prevail, the marijuana tax revenue distribution will adjust for at least fiscal year 2024,” Sullivan wrote in the conclusion of the report. “When the next legislative session convenes in 2025, legislators again will have an opportunity to review statutes and craft policies, meaning the marijuana tax distribution may see additional adjustments in the near future.”

How the marijuana revenue would be redistributed

Under the structure passed by lawmakers in the 2021 session, the marijuana tax revenue and fees the state collects each fiscal year is transferred out to multiple accounts. The Department of Revenue first reserves three months of operating expenses — about $4.1 million — out of the full pot of money, which totaled $56.4 million in fiscal year 2023.

Next, $6 million goes to the Healing and Ending Addiction through Recovery and Treatment (HEART) Fund for behavioral health and treatment programs.

Then, money is distributed as follows: 20% for wildlife habitat and conservation funding; 4% each for state parks, trails and recreational facilities, and nongame wildlife; $200,000 for veterans and surviving spouses; and $150,000 for the Board of Crime Control. The rest of the money then goes into the General Fund.

Competing bills during the session sought to redistribute more of the money toward crime prevention, the Department of Justice, and the General Fund, but SB 442, sponsored by Sen. Mike Lang, R-Malta, won out among the three after it was rewritten to put more money toward county road maintenance.

That curried the favor of dozens of conservation, rural Montana and other groups who said that repairing and maintaining county roads with the money would be beneficial in supporting the habitat and outdoors funding that some said was the reason that Montanans voted to legalize adult-use marijuana in the first place.

Under the final version of the bill, which passed with support from 130 of 150 lawmakers, the HEART Fund gets 11% of the tax revenue instead of a flat $6 million, veterans and spouses get 5%, the Board of Crime Control gets 0.2%, county roads get 20%, and the other allocations remain unchanged aside from the drop in money going toward the General Fund.

The report says the change of the HEART Fund getting $6 million to 11% of the revenue means the amount the fund receives will fluctuate based on adult-use and medical sales and the fund for veterans and surviving spouses could see “a significant increase” in funding if tax collections continue to increase.

Total marijuana sales have topped $24 million a month in every month since February 2022, peaking so far last August at $28.7 million for the month. From January 2022 through January 2024, the state has sold an estimated $647.8 million in medical and adult-use marijuana, collecting about $104.1 million in total tax revenue. Nearly 94% of that tax revenue comes from adult-use sales, according to the Department of Revenue.

Sullivan’s report forecasts how those percentages allocate out into dollars if the override were to pass by using the $56.4 million in revenue that was dispersed last June 30 for the prior fiscal year.

According to her analysis, if Montana brought in the same amount of revenue in FY2024 and SB 442 were law, the HEART Fund would see a reduction of $247,000 compared to last year under the new 11% formula.

The report says the wildlife habitat, state parks, trails and recreation, and nongame wildlife funds would likely see 13% increases, respectively, totaling to an increase among all four funds of about $2 million.

The veterans and surviving spouses fund would see a 1,200% boost of about $2.4 million dollars, according to the report. The Board of Crime Control would lose about $45,000, or 30%, of its current funding, while the General Fund would lose about $20.6 million dollars, a 66% reduction from last year.

Where the veto override stands

Lawmakers will have until 5 p.m. on April 18 to send their ballot back to the Secretary of State’s Office, and they will need two-thirds of the Legislature to support the override for it to pass.

Three of the groups that were key in bringing the outside groups and lawmakers together to support the bill during the session — the Montana Association of Counties, Wild Montana, and the Montana Wildlife Federation — sued to challenge the Legislature’s lack of ability to override the veto. They said Tuesday when the override polls were sent out they were pressing lawmakers to support the override.

“Respectfully to the 130 legislators who supported this vital bill almost a year ago, ‘Stick to your guns,’ the next 30 days will impact what makes Montana, Montana, for the next 30 years,” Montana Wildlife Federation Executive Director Frank Szollosi said in a statement earlier this week.

But Republican leadership in both the House and Senate – many of whom supported the bill during the session – are now trying to convince their members not to fill out the override poll or to vote against the override.

Twenty-seven Republican senators sent a letter to the Supreme Court on Monday in a last-minute attempt to block the override, saying that the Senate president was still in possession of the bill and arguing that if the poll override were sent out without the actual original copy of the bill, it would be an illegal poll.

“The legislature will not participate in an unconstitutional poll,” the letter said.

On Wednesday, a day after the polls were sent out, seven Republican members of House leadership also said the courts’ decisions were unconstitutional and, like the senators, claimed they would not be participating because they believe the courts are stepping on the Legislature’s toes.

“All three branches of state government must be vigilant to protect the powers divided by our constitution,” read the letter from the House Republican leaders, which was addressed to the Supreme Court. “To that end, House Leadership will not be participating in Judge Menahan’s opinion of how he believes the legislature should operate. This has no bearing on the content of SB 442. That will be addressed with a solution provided by us, the legislature.”

Lang, in an opinion piece published in his hometown paper this week, urged his colleagues to support the override: “SB 442 brought Montana together in a time when division is the preferred course of action in politics. I hope my colleagues will still stand with me and cast their vote to overturn the governor’s veto, and support this excellent bill.”