Bloomberg News

Montana Governor Builds Surplus ‘Running Government Like Ranch’

January 06, 2012

Dec. 27 (Bloomberg) -- Governor Brian Schweitzer has given out coins made of Montana palladium worth more than $600 to people who suggest ways for the state to save money.

His favorite idea: quit printing government telephone directories.

“If you ain’t smart enough to figure out how to find someone online, you probably got no information that we needed anyway,” Schweitzer said in an interview.

While other governors commonly say they run their states like a business, Schweitzer, a 56-year-old Democrat, calls his management style “running government like a ranch.” Montana was one of only two states to report surpluses from 2009 to 2011, according to the Center on Budget and Policy Priorities. The other was North Dakota.

Rising tax collections on individual income, corporate licenses, oil and gas production and insurance will leave $427 million to spare at the end of June 2013, according to a Dec. 5 report by the Legislative Fiscal Division, almost three times what was forecast earlier this year.

One result is that municipal bonds from Montana have returned 10.35 percent this year, second only to Wyoming, outperforming the national average of 8.63 percent, according to Barclays Capital. As for those one-ounce palladium coins donated by a local mining company, they’re worth about $660 now, up from $430 in May, 2010.

‘Not Boom State’

Gains have come “even though the economy doesn’t seem to be quite breaking out,” according to Patrick Barkey, director of the Bureau of Business and Economic Research at the University of Montana, Missoula. “We’re not a boom state like North Dakota. There have been decent earnings and employment growth in mining.”

The state ranked 18th in the U.S. in employment growth and 25th in income growth for the 12 months ended in September, according to the Bloomberg Economic Evaluation of States index.

Prices on publicly-traded Montana companies fell 19 percent this year through Dec. 23, while the Standard & Poor’s 500 equity index rose 0.68 percent, according to the index. An exception was Bozeman-based RightNow Technologies Inc., an online customer-service software company that jumped 80 percent, the most in the index, after it agreed to be acquired for $1.5 billion by Oracle Corp.

When it comes to the surplus, Don Cowles, president of Wild West Shirt Co. of Bozeman, says Montana lawmakers deserve more credit than the governor. It was the Legislature that opposed Schweitzer’s proposal to give state employees a 4 percent raise over two years, for instance, he said.

“The reason the budget has a surplus is the Legislature put a lid on spending,” Cowles said. “They didn’t approve a pay increase for employees. They didn’t give the universities the money they asked for. They really held back on their spending.”

Health-Care Target

Schweitzer, who has one year left in his second and final term, has turned his budget scythe to what has become, according to the National Governors Association, the largest expenditure among states: health care.

“My constant quest is to find more efficiencies, whether it’s how much gas we use or how much electricity we use, or how many vehicles we buy or how many computers,” Schweitzer said Dec. 6. “Every one of these is a fight in its own way, but they save us a little money.”

Schweitzer’s plan is to create a medical purchasing pool that combines recipients of Medicaid, the joint state-federal health-care program for the poor, with state employees, university students and beneficiaries of federal agencies such as the Bureau of Indian Affairs. The pool would negotiate discounted rates for drugs and services.

Montana would also open clinics staffed by state employees whose goal would be to keep patients from expensive hospital stays. Co-payments would discourage overuse, Schweitzer said.

Medical Makeover

He said his medical makeover is based on what he observed in neighboring Saskatchewan. While similar in population, the Canadian province’s health-care costs are half of the $8 billion a year that Montana spends, the governor said.

“How do we get it for half price?” Schweitzer asked. “Eighty-seven percent of their health care is delivered at clinics.”

Helena, the state capital, has three magnetic resonance imaging machines for its 28,000 residents, Schweitzer said. The entire province of Saskatchewan has five.

“We have five times as many procedures per patients as they do,” Schweitzer said. “You had no idea when they drew that blood that they tested it for everything they could think of including malaria and there was a billing code for each one of them.”

Federal Waiver

The governor said he’ll ask the federal Department of Health and Human Services for a waiver from Medicaid rules to get more control over where people are treated. Ideally, he said, the federal government would give the state block grants, allowing it to spend federal money as it wants, rather than relying on reimbursements for expenses. That is an idea popular with Republican governors including Florida’s Rick Scott and Texas’s Rick Perry.

The state health takeover is not as far-fetched as it might seem, according to Edwin Park, a vice president for health policy at the Center on Budget and Policy Priorities, which is based in Washington. The federal government will be granting waivers to states that want to experiment with different health- care delivery models in 2017, he said.

Single-Payer System

Vermont Governor Peter Shumlin, a Democrat, signed legislation in May to give residents health-care cards and make the state the purchaser of all services by 2017, the first such single-payer system in the nation.

Schweitzer, a soil engineer who owns two working ranches, used a branding iron to burn the word “veto” on seven paper bills passed by the Republican-led Legislature in April. With his term expiring in January 2013, he concedes he’ll probably be out of the statehouse before Washington responds to his proposal.

Schweitzer is a “showman” who often takes credit for budget cuts pushed by political rivals, according to Mike Milburn, a Republican from Cascade who serves as speaker of the House of Representatives.

After the governor leaves office, “I don’t know what he’ll be doing,” Milburn said in a telephone interview. “He’s positioning for something.”

--Editors: Pete Young, Jeffrey Taylor

To contact the reporter on this story: Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net


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