HELENA – Montana state agencies are being directed to prepare for some substantial budget cuts starting this summer, as 2017 tax revenue probably won’t be hitting targets needed to avoid the cuts.

Likely cuts for the state’s upcoming two-year budget include an across-the-board reduction of 0.5 percent in most state agencies’ spending, $7 million in rates paid to providers of medical care for the needy, nearly $4 million in mental-health services and deep cuts in funding for the State Library and State Historical Society.

The cuts are outlined in a bill passed by the 2017 Legislature in April and signed into law by Gov. Steve Bullock, identifying four levels of specific cuts that will occur if 2017 tax revenue falls short of certain targets by mid-August.

Gov. Steve Bullock’s office confirmed Monday it has directed agencies to prepare for “Level 4” cuts – the deepest level. Those cuts, however, are “only being considered as a worst-case scenario,” his office said.

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Still, a report last month by the Legislative Fiscal Division indicated that 2017 tax revenue could come in below the amount needed to avoid Level 4 cuts.

Level 4 cuts would include cancellation of a small pay increase for state employees and some reductions in state aid to public schools.

Officials at the State Library and Historical Society told MTN News Monday that they’re expecting “Level 3” reductions to occur – which would include cuts to their agencies of 14 percent of more.

“We’ve been running quite efficiently here for quite a number of years, so there isn’t a lot of fat that we can just slice away and be good,” said Bruce Whittenberg, director of the Historical Society. “The thing that will be noticeable is that programs and services will have to be reduced. There’s just no way around it.”

If Level 3 occurs, total reductions for the Historical Society’s $12 million, two-year budget will reach $1.7 million, or 14 percent.

For the State Library, the Level 3 cuts will be $1.36 million over the next two years – on top of $620,000 already sliced from its budget in the main budget bill, for a total reduction of about 16 percent.

State Librarian Jennie Stapp told MTN News the library is planning to lay off 10 staffers, close a reading room in Helena and combine its “talking book” services for the blind with another program.

“We can’t talk about cuts of this magnitude without talking about people, and that means fewer staff to manage the wealth of information that we have about Montana, and to ensure our patrons have ready access to it,” she said.

The State Library, which is in a building one block east of the Capitol, maintains a broad digital collection of information on state government, land ownership, water resources and other material, and also offers consulting help to libraries across the state.

Another revenue-triggered budget cut almost sure to occur is $400,000 a year in state aid to libraries across the state, for the next two years.

Lewis and Clark Library Director John Linn said the cut will cost the Helena public library $23,000 a year, and that it can find a way to absorb it – but that the cuts will hit smaller libraries harder, he said.

“The need is growing (for library services), and at the same time, we’re reducing their ability to provide those necessary services,” Stapp said. “The other concerning thing that I’m hearing is that budgets at the local level are also declining, so this is a cut on top of cuts that libraries are having to take at the local level as well.”

Whether the cuts occur depends how much general tax revenue the state gets for fiscal year 2017, which ends June 30.

The 2017 Legislature estimated that general state tax revenue would be $2.213 billion for fiscal 2017, and based the state’s two-year budget on that projection. The two-year budget period begins July 1.

However, the Legislature’s budget “trigger” bill said Level 3 cuts would occur if that revenue is less than $2.192 billion – about $20 million under the estimate – and that Level 4 cuts would occur is the revenue is less than $2.18 billion, or nearly $33 million under the estimate.

In a report published earlier this month, the Legislative Fiscal Division indicated that fiscal 2017 could be $41 million under the estimate, or well under the Level 4 target.

The division plans to update its revenue report later this week.

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