Government

The Utility Preapproval Mess: Socialism Republican Style

17 February 2021
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By Roger Koopman

When Travis Kavulla and I were still serving on the PSC, we often made the point that protected utility monopolies like NorthWestern Energy were dedicated to “privatizing their profits by socializing their risks.”  Profit — based on efficiency, performance and hard work — is a very good thing, that incentivizes every competitive and free enterprise.  But “profit” based on risk avoidance, protectionism and gaming the government system is the opposite of free market economics, and like socialism in general, rewards failure and punishes the consumer. 

HB 99, currently before House Energy, Technology and Federal Relations Committee, would go a long way to fix the perverse, socialistic system of utility monopoly regulation that currently holds sway in Montana, by repealing a terrible, monopoly-coddling process that provides preapproval by the PSC of the generation assets NWE seeks to purchase.  This aspect of utility regulation law literally turns incentive-based market economics on its head, and passes all the financial risk of a utility’s bad decisions and over-payments onto the ratepayer. Worse, current law actually rewards utility monopolies like NorthWestern for knowingly paying too much for an asset, by providing approximately 10 percent net profits for every extra dollar of cost the PSC allows in preapproval. There is no going back.

Most utilities across the nation do exactly what any private enterprise is expected to do: make prudent, business-smart decisions on their acquisitions, based on an extensive process of analysis and due diligence. They then live with those decisions on a risk/reward basis.  But not NorthWestern Energy!    Before they buy anything, they are guaranteed that there will be no risk attached to their decision.  The PSC’s preapproval ensures that all bad outcomes will fall on the ratepayer, while the utility will continue to have its customers cover all costs plus 10 percent.  So where is the incentive for NorthWestern to choose wisely and buy low?  The answer: there is none.

Preapproval is an ancient relic from “deregulation” days, when Montana Power couldn’t own power plants and was getting all its electricity from outside sources.  It has no relevance to the post-deregulation energy marketplace, and yet NorthWestern’s lobbyists have been able to successfully keep it in statute for 14 years since deregulation ended.  The company has become weaker, not stronger, as a result of being artificially insulated from normal business risk.  They continue to successfully socialize the risk through the power bills they send to all ratepayers, while reaping windfall profits on their bad decisions.  Tragically, there are numerous examples of this.

The reason this anti-market, anti-consumer, socialistic statute remains on the books is not because the liberal Democrats embrace it, but because the purportedly conservative, free market Republicans do!  Republicans just don’t get it when it comes to market-based, incentive-based regulation of state-sponsored monopolies like NorthWestern Energy.  For years now, GOP legislators have labored under serious misconceptions about utility regulation and the fundamental difference between risk-overcoming competitive enterprises and risk-avoiding, protected monopolies. 

I keep wondering when the light will go on, and these otherwise conservative Republicans will start reminding themselves of what they say they believe in, regarding freedom versus socialism.  I keep hoping that in the “next session,” Republicans will finally leap over the chasm they created between their free market beliefs and the way they swaddle NorthWestern Energy in a blanket of risk-shifting protectionism.

HB 99 is that opportunity for Republican legislators to take a stand for good, market based economics that not only serves and protects the interests of captive NWE consumers, but also prompts the utility itself to operate as a proud, confident and self-reliant enterprise, willing to assume its own business risks and become stronger and more efficient in the process.  On the energy utility front, it’s time to replace the lose-lose of socialism with the win-win of freedom. 

SBA Updates COVID Programs

17 February 2021
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By Brent E. Donnelly, District Director –  Montana U.S. Small Business Administration

Information on the COVID programs through SBA continues to be updated..  Monitor the SBA website at www.sba.gov.

l Economic Injury Disaster Loan (EIDL) – The application portal remains open for EIDL.  Businesses may apply for loans through December 31, 2021.

l  Updated FAQ’s are on the SBA website- Frequently Asked Questions: COVID-19 Economic Injury Disaster Loan (EIDL) (sba.gov)

l  EIDL main web page (includes information on the EIDL Targeted Advance):  COVID-19 Economic Injury Disaster Loans

l Shuttered Venues Operators Grant (SVOG) – FAQs were updated for more clarity and posted on the SBA website on Friday.  Shuttered Venue Operators Grants: Frequently Asked Questions Feb. 5, 2021 (sba.gov)  Organizations considering applying for SVOG should review the updates.  I am including a few (be sure to see the link for all) items of note below which we’ve received some questions: (note:  these are “copy/paste” from the FAQ’s)

l Is an entity that applied for and received a Paycheck Protection Program loan in July 2020 eligible to apply for an SVOG? Yes, if an entity applied and was approved for a PPP loan prior to Dec. 27, 2020, it is eligible to apply for an SVOG.

l  Is an entity that applied for a First Draw or Second Draw PPP loan on or after Dec. 27, 2020, eligible to apply for an SVOG? No. Both examples would not be eligible to apply for an SVOG unless and until the PPP loan application (whether First Draw or Second Draw) is declined.

l  Can an entity apply for a PPP loan now and decide later on the loan if it did not receive an SVOG? At what stage is a PPP loan considered “received”? No. Per the Economic Aid Act, as well as how the PPP loan system operates, entities cannot apply for a PPP loan and SVOG at the same time. Entities must make an informed business decision as to which program will most benefit them and apply accordingly. If an applicant is rejected by one program, it will then be eligible to apply for the other.

l  What can an entity do to get ready to apply? As the SBA works on building the application platform, it would be in your best interest to register for a DUNS number so you can then register in the System for Award Management (SAM.gov). Also, gather documents that demonstrate your number of employees and monthly revenues so you can calculate the average number of qualifying employees you had over the prior 12 months. Lastly, determine the extent of gross earned revenue loss you experienced between 2019 and 2020. This and additional information such as floor plans, contract copies and other evidence will be needed to apply for an SVOG.

l Must applicants register in the System for Award Management (SAM.gov) or can they use other identifiers like ITINs or EINs to apply for an SVOG? SVOG applicants need to register with the federal government’s SAM at www.SAM.gov to apply and cannot use an Individual Taxpayer Identification Number, Employer Identification Number, or other means of identification or registration. Interested parties are encouraged to obtain a Dun and Bradstreet (DUNS) number (a prerequisite for SAM registration) as soon as possible. With a DUNS number, interested parties then should immediately begin registering in SAM.gov, as the SAM registration may take up to two weeks once submitted.

l When will SVOG applications open? The SBA is working expeditiously to open SVOG applications and encourages you to stay up to date by frequently visiting www.sba.gov/coronavirusrelief for information.

l  SVOG website:  Shuttered Venue Operators Grant (sba.gov)

Chamber Continues Focus on Crime, Other Legislative Issues

17 February 2021
Dennis Pyburn
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By Billings Chamber of Commerce, Billings Chamber of Commerce

When we asked our membership last June about policy priorities for the 2021 Legislative Session, Public Safety was in the top 3. It was not a surprise. Anecdotally we hear from members tired of reading about another murder, wondering when we’ll get the meth epidemic under control, and avoiding downtown because of the transients. Unfortunately those concerns aren’t overblown.

Violent crime in Billings increased 115% in the last ten years. A report put together in 2019 for the Substance Abuse Connect (SAC) group, a partnership of providers, law enforcement, and businesses with the goal of addressing addiction issues in Yellowstone County, highlights some other sobering statistics:

—“Substance misuse and abuse are common in the Yellowstone County/ Billings community with more than 4,000 individuals aged 12 years or older dependent on or abusing illicit drugs.”

—”[M]ethamphetamine is the most common drug seized by law enforcement officials in the community.” 

Substance Abuse Connect has made significant progress since its inception to identify our needs and work toward the goals of the 2020 – 2023 Action Plan: (1) increasing our community’s collective impact; (2) improving diversion and treatment; and (3) increasing access to substance abuse prevention.

 In addition to the efforts of SAC, the Downtown Billings Alliance hired a Resource Outreach Coordinator (ROC) to work alongside the BPD Downtown Resource Officers and engage individuals living with substance abuse disorder. Recently, an allotment of beds at the jail were made available to re-institute a highly successful diversion and treatment program used in Billings know as Motivated Addiction Alternative Program. In short, the goal is to move people from addiction, into treatment, and ultimately onto recovery and transformation.

 While Billings has seen some great successes recently, we continue to face issues of capacity and funding. Additional resources are needed to fully combat the drug epidemic we face. Governor Gianforte’s focus on this matter, and his creation of the Healing and Ending Addiction through Recovery and Treatment (HEART) fund can help provide those resources. Using tax revenue from marijuana and tobacco tax settlement monies the governor’s budget invests $23.5 million/year to fund a complete continuum of prevention and treatment in Montana communities.

The Billings Chamber is grateful for Governor Gianforte’s prioritizing addiction issues. Billings has built a great model of cooperation and success. Additional resources from the state will help to fill the gaps we might not otherwise be able to plug. I’m hopeful that before the 2023 Legislative Session, we’ve done enough to combat the drug epidemic and improve public safety that our members no longer list public safety in their top 3 issues.      

House Bill 252, Tax credit for trades education and training, Rep. Llew Jones (R), Conrad

Billings Chamber Supports

One of the issues we hear from industry and trades businesses is a need to balance the emphasis of education between four-year colleges and careers in the trades. Providing a tax credit for businesses to offset the costs of trades education and training is a productive step toward addressing the workforce challenges our trades businesses face. This is incredibly important now, as we recover from a global pandemic that will forever impact our economy. Businesses have found new efficiencies and the evolution of new technologies necessitate continuous education and training across industries. On February 9th, the bill will be heard in House Tax.

House Bill 303, Business Investment Grows (BIG) Jobs Act, Rep. Joshua Kassmier (R), Ft. Benton

Billings Chamber Supports

One of the Billings Chamber’s priorities is to reduce the cost of doing business in Montana. The governor’s Business Investment Grows (BIG) Jobs Act accomplishes that goal. Current law allows a tax exemption on the first $100,000 of business equipment subject to the business equipment tax (BET). The BIG Jobs Act would double that exemption to $200,000, effectively eliminating payment of the BET by approximately 4,000 small business owners. With less spending on the BET, this means more spending in our local communities, benefiting businesses that may not even be subject to the BET. On February 9th, the bill will be heard in House Tax.

Senate Bill 159, Personal income tax relief, Sen. Greg Hertz (R),  Polson

Billings Chamber Supports

This bill reduces the top personal income tax rate from 6.9% to 6.75%, starting in tax year 2022 and applying to taxable income above $18,500. Relative to other western states, our current top income tax rate is one of the highest which can be a barrier for attracting the best and brightest workforce to Montana. While we know tax rates are only one of many factors affecting where people decide to live, our competition has similar outdoor opportunities and quality of life, making the difference in tax rates stand out. And with more money in their pockets, Montanans will spend more with our local businesses. On February 11th, the bill will be heard in Senate Tax. 

Banking Regs Problematic

17 February 2021
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The Office of the Comptroller of the Currency, an independent bureau within the United States Department of the Treasury, has finalized a new mandate on bank lending. Though aimed at expanding access to banking services, CEI Senior Fellow John Berlau warns the rule will impose significant red tape and political worries on banks of all sizes:

“The final ‘fair access to financial services’ rule released by the Office of Comptroller of the Currency is the wrong answer for politically disfavored businesses and will burden banks of all sizes with more red-tape and government-interference with financial transactions. The rule will lead to more, not less, politicization of the financial sector as businesses from abortion providers to gun manufacturers can harangue Main Street banks for ‘political bias’ in routine lending decisions. CEI believes the government should neither pressure banks to avoid certain industries, as the Obama administration did in the now-defunct Operation Choke Point, nor force banks to provide financing to these industries, as this rule would do.

“It is especially disappointing that the final rule does not appear to exempt banks of any size from its reach. While the OCC states a ‘presumption’ of $100 billion asset threshold, it specifically adds that banks smaller than this size could be subject to the rule if they meet a vague definition of ‘raising the price’ of a financial service. This will leave a costly state of uncertainty for the nation’s smallest banks.

“As I noted in comments to the OCC, the rule ‘would particularly harm the new entrants to financial services that the OCC is now rightly championing. These firms may have specific fintech areas of expertise, or they may wish to specialize in serving businesses specific to their respective communities.’ Thus, these banks may get punished by this rule for excluding types of businesses outside their areas of specialization.

Governor’s BIG Jobs Act Gets Big Support

16 February 2021
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Business leaders, farmers, ranchers, and other stakeholders testified on Feb. 9 in support of Governor Greg Gianforte’s Business Investment Grows (BIG) Jobs Act.

A key initiative in Governor Gianforte’s Roadmap to the Montana Comeback budget, the BIG Jobs Act, H.B. 303, would exempt business equipment up to $200,000. The business equipment tax requires small business owners, farmers, and ranchers to value their property, file paperwork, and pay tax on their business equipment. The current exemption is $100,000. This initiative will relieve 4,000 small businesses across Montana of the burden of paying business equipment tax, encouraging those businesses to grow their companies and create jobs.

The BIG Jobs Act, which Rep. Josh Kassmier (R., HD 27) sponsors, has received widespread support from small business owners, farmers, ranchers, and representatives across industries in Montana. Many testified in support of the bill before the House Taxation Committee this morning.

Steve Arveschoug, executive director of the Big Sky Economic Development Council: “This bill…is a really important step forward for Montana’s broader state economy….It has that on-the-ground impact that we really need right now….It means a great deal to the businesses in the communities that I serve in our region in the state of Montana.” 

Daniel Brooks, director of business advocacy for Billings Chamber of Commerce: “One of the Billings Chamber’s priorities is to reduce the cost of doing business in Montana, and this bill does just that: reducing taxes and allowing businesses to be able to invest in growth….We also appreciate the backfilling of local revenues to ensure that local governments aren’t burdened with that choice of either raising taxes or cutting services because of changes that happened up in Helena. We’d like to thank the governor for his efforts to reduce the cost of doing business in Montana.”

Jason Brother, CEO of the Lower Yellowstone Rural Electric Cooperative: “HB 303 would be a wonderful addition to attract new businesses and strengthen established businesses in the state. Lower Yellowstone Rural Electric Cooperative supports these bills on behalf of the membership of the cooperative and encourages you to pass them for the great State of Montana.”

Cary Hegreberg, president and CEO of Montana Bankers Associations: “I’m here representing the thousands of small businesses that our bankers around the state serve with commercial loans, deposit accounts, and other services….Any relief that small business in Montana can get will be of great benefit, and we strongly support this bill.”

Cynthia Johnson, farmer, rancher, and vice president of the Montana Farm Bureau Federation: “I speak in favor of HB 303 because of the positive impact to every business in Montana, but especially agriculture….We use a lot of equipment related to our business: tractors, combines, trucks….and we can’t do business without these.”

Tammy Johnson, executive director of Montana Mining Association: “This bill is about our valued associate members: our small businesses who sell everything from pipe, to PPE, to medical equipment….[HB 303] is very valuable for all of those members who support our producers in Montana, and we urge a due pass on this legislation.”

Bridger Mahlum, government relations director for the Montana Chamber of Commerce: “The Montana Chamber has been a strong advocate for the past two decades of lowering or eliminating the business equipment tax….This is a bread-and-butter issue for the many hundreds of members that the Montana Chamber represents, and we would strongly urge you to pass this bill.”

Nicole Rolff, senior director of governmental affairs for Montana Farm Bureau Federation: “We are pleased to be able to support HB 303 this morning….Farming and ranching is a capital intensive business. They often say we’re asset rich and cash poor, because there are a lot of tools that a farmer and rancher needs to run the business….We believe that this bill will encourage investment in two ways: one, reducing the tax burden on farmers and ranchers will allow a farmer to choose to add an additional piece of equipment to their lineup, or it may allow a rancher with a few more extra dollars in his pocket to go and reinvest that in a local community. It’s a win-win.”

Jan Rouse, government affairs specialist for NorthWestern Energy: “We see this bill as providing increased strength to our families, financially, and the economic benefits of businesses. Overall, as a part of this larger package, we see this bill as an optimistic and energetic view of our vision for the state of Montana going forward.”

Elaine Taylor, president and executive director of Montana Beverage Association: “[We’re] supporting HB 303 today and its benefits for businesses in Montana. On a personal note, I’d also like to support 303 for my family ranch on my side, as well as the family ranch on my husband’s side.”

Jason Todhunter, headwaters regional representative of Montana Logging Association: “It’s an exemption, not a threshold, that means everyone gets a little bit of tax relief. It’s going to be a really big deal for the small operators, but everybody will see something out of this, so we urge your support.”

Steve Wade, on behalf of the Montana Contractors Association: “Montana Contractors has memberships of all sizes, and HB 303 is an extremely beneficial piece to assisting those smaller companies that comprise our membership in one, being able to invest in their businesses, but also being able to invest in their employees.”

Jule Walker, field services specialist for the Montana School Boards Association: “Montana School Boards Association supports HB 303 for the targeted tax relief to small businesses. We appreciate that school districts will be reimbursed for that lost revenue. We respectfully request your support for HB 303.”

Gary Wiens, CEO of the Montana Electric Cooperatives’ Association: “HB 303 would…help close the gap between Montana and its neighboring states in its efforts to attract important businesses to our state. The Montana Electric Cooperatives’ Association supports these bills on behalf of the membership, which provide power in every county in Montana, and encourages you to pass them for the great State of Montana.”

Ronda Wiggers, representing Montana Coin Machine Operators, Montana Water Well Drillers Association, Helena Chamber of Commerce, and the National Federation of Independent Business: “When I sent these bills out ten days ago to the business associations that I represent, they unanimously asked me to come before you and support lowering their taxes….This money in the pockets of our small businesses being able to spend it on the things they need to keep their businesses going is very important for our local economies. The associations I represent would ask for a due pass.”

Governor Awaits Arrival of SB65 to Lift Mask Mandates

16 February 2021
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Governor Greg Gianforte signed on Wednesday the bill that he said had to pass in order for him to lift the mask mandate. It passed  both houses of the state legislature, and as of press time, an announcement was expected from the Governor  word about lifting the mask mandate.

SB-65 eliminates liability for businesses regarding contracting COVID-19, about which the Governor wanted assurances before lifting the mask mandate. Besides passage of HB-65, he also wants to make sure that vaccinations are being widely distributed in the state.

The bill passed final reading in the House on a 64-36 vote. It passed the Senate 32-18.

SB 65 was introduced by State Senator Steve Fitzpatrick, R-Great Falls.

Prior to the start of the Legislative session, Montana NFIB reported in their survey of business owners, 96.8 percent said protection from frivolous lawsuits due to COVID-19 should be a top legislative priority.

Besides addressing the potential liability of a wide range of owners or supervisors the bill addresses the issue of requiring vaccinations, stating, “If a federal or state statute, regulation, order, or public health guidance related to covid-19 recommends or requires a vaccine, an individual is not required to receive a vaccine and a person is not required to ensure employees or agents are vaccinated to meet the standard of care.”

A business or organization, health care provider or manufacturer cannot be held liable for causing death or injury of an individual unless it is through an act or omission that constitutes gross negligence, willful and wonton misconduct or intentional harm.

Concerns that the legislation could wind up boomeranging into forcing compliance with health orders or mandates, which are not currently enforceable, is allayed with specific wording that says a person “may assert as an affirmative defense” that they took reasonable measures consistent with a federal or state statue”, etc., but “This section may not be construed to impose liability on a person for failing to comply” with such laws or regulations.

At third reading, the draft showed that language had been struck out pertaining to “safe harbor” for situations in which the premises owner was in “compliance with regulations, executive order, or public health guidance,” indicating that that clause aimed at enforcing compliance had been rejected by legislators.

The bill further makes clear, “A government order, regulation, or PUBLIC HEALTH guidance related to covid-19 may not create and may not be construed to create a new cause of action against any person….”

It also states that a person is not required to ensure that others comply with mandates or orders to wear masks. Nor — even if it is mandated by one public entity or another — are they required to conduct temperature checks before allowing a person to enter a premises if the individual refuses to allow a check.

The bill is not retroactive, meaning it doesn’t shield businesses from lawsuits regarding situations that occurred earlier in the pandemic.

Abatements Incentivize Business

16 February 2021
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Since 1994, Yellowstone County and the City of Billings have been giving businesses a boost to start and to grow, through two different tax abatement programs. Originally, local businesses that received the benefit of those programs invested a grand total of $468,784,880 and in 2019 paid out $153,769,851 in salaries.

The fact that refineries, Phillips 66 and CHS, were among the 18 businesses approved for the abatement programs distorts somewhat the true impact of just the average size businesses. Factoring out those two investments, the remaining 16 businesses still invested a total of $70,971,703 and supported total payrolls of $45,997,078.

Total tax savings for all the participants was $3,823,817. Factoring out the refineries the tax savings were $234,629.

The data was presented this week to Yellowstone County Commissioners by Patrick Klugman, Senior Project Manager, Community Development with  Big Sky Economic Development.

The benefit of the programs is that they spawn economic growth in helping to entice new businesses and helping existing businesses to expand. Even with the tax breaks the businesses receive on new investment the dynamics of the economic process most often means the businesses wind up generating more in property tax revenues because of increasing property values and continued growth.

As a case in point, Klugman explained that one business whose program has expired – Motor Power Equipment —  made a capital investment of $2,530,00, which had a beginning market value of $1,900,000 but ended up with a market value of $5,400,00, which means the property increased in value $3,500,000. So while their beginning general tax bill was $42,555, they ended up with a tax bill in 2019 of $75,319 – an increase in tax revenue for local government of $32,764.

Under the tax abatement program and the final year of eligibility in 2018, the company saved $1,950 in property taxes, while paying out $4,630,992 in salaries. Now, of course their annual payroll continues and they are paying the full tax bill.

Other businesses that have expanded under the programs include American Steel, Aspen Air, Billings Flying Service, Dalco industries dba Teton Steel, D & M Enterprises (Auto Trim Design), Heights Eyecare, Home2Suites by Hilton, Home Science Tools, Jefferson Lines, Mercedes Benz of Billings, Montana Peterbilt, Northwest Scientific, Summit Resource International, Shipton’s Big R, TrueNorth Steel, Woods Powr Grip and Zoot Properties.

The 1988 state legislature launched the programs.

There is a 10-year program and a 5-year program.

The county began offering 10-year program in 1994 and the 5-year program in 2002. The city began offering both programs in 2005.

The 10-year program requires that 50 percent of the company’s revenues are generated from out of the state.

The five year program allows tax reductions on remodeling, reconstruction, and/or expansion of existing real property when a project makes improvements exceeding $500,000 to the property.  Property taxes on the value of the value of improvements may be reduced by 100 percent for the first five years, after which property returns to its full taxable value.

The 10-year program, called the New & Expanding Industry Tax Incentive Program, allows the taxable value of the real property to be reduced by 50% in the first 5 years. In years 6-10, the tax obligation incrementally increases by 10 percent a year and the savings decreases until the full 100% liability is required and the abatement expires in year 10. The 2017, the state legislature altered the program to allow local government discretion to reduce taxes by 50 percent or by 75 percent with an incremental 15 percent increase over the last five years.

Horseracers Present Plan for Metra

5 February 2021
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A proposal for a multi-use grandstand facility that would also accommodate horseracing in the same location as the recently removed grandstand was presented to county commissioners on Tuesday by Beth Koch, President of the Billings Turf Club.

Kock said that her organization was presenting the plan as an option for the Metra Park Master Plan for Metra Park’s Advisory Board and administrators, who are soliciting public input. County Commissioners acted to raze the historic grandstands late this fall along with a number of other older buildings at Metra Park, a county owned facility.

The proposed plan could bring horseracing back to Billings with a three-pronged approach of the county, Metra Park and the industry partnership and to help raise money for the project.

Kock advocated for the return of horseracing to Billings and Metra Park saying that at one time it was calculated that horseracing brought $4 million to the community ever year. It’s been ten years since Billings hosted any horseracing.

In 2021, there will be two race meets, one in Miles City and the other in Great Falls, for which the Board of Horseracing has provided $628,000, according to Koch. Koch said, “We could have gotten dates for Yellowstone County if there was a race track.” She went on to say that the Board of Horseracing wants to add another track.

Koch raises and trains horses which she races in Wyoming, where she said there are 1700 head of race horses, and where they will have 50 days of racing in 2021. Wyoming’s experience is something that should and could be duplicated in Montana, given the revenues expected to be generated through the advent of Historical Horseracing, which is expected to become a reality in Montana, believe many sport and gaming enthusiasts.

Could Have Been Worse, 2021 Looks Promising

4 February 2021
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As bad as it was, the experience of other states shows that it could have been much worse for Montana.

While the economic restraints that were imposed because of COVID-19 has had a profound impact on the economies of Montana and the nation, “the surprise is that Montana’s job setback, while severe, has been milder than all but a handful of predominantly Mountain West states,” reports Patrick Barkey, Director of the Bureau of Business Research (BBER) at UM, which hosted a review of the state’s economy in a virtual program on Feb 1 and 2.

“To say that this has been a surprise is an understatement,” said Barkey. “The closure of the international border, the huge declines in air travel and the turbulence in oil market seemed to be formidable headwinds for many of our key industries. Yet the opportunities that the COVID-19 pandemic has presented Montana businesses, which are too numerous to list, have helped fill at least part of the hole,” Barkey wrote in the Montana Business Quarterly, published by BBER.

Usually each year the BBER conducts a tour of the state’s major cities presenting half-day seminars that provide a broad range of information about the state’s economy. This year, because of COVID restraints, the format changed to a two-day “zoom” conference, featuring a broad range of speakers.

In general, the state’s leading economists predict that Montana will, economically speaking, rise above the obstacles that the virus has thrown at us, but things will be different and there remains a lot of uncertainty.

“The state economy enters the new year with both momentum and uncertainty,” said Barkey. Predictions are difficult because “…the connection between economic growth and public health is not that simple anymore.”

Recessions of the past predominantly hit one market segment over others, but the COVID recession “left no corner of the state’s cities and regions untouched,” according to Barkey, “…it has unfolded in a way that bears little resemblance to previous economic downturns.”

Montana’s economic performance in 2020 “will undoubtedly go down as the worst in its post-war history.”

“Over the first two quarters of last year, Montana suffered a 8.2% payroll job decline, amounting to almost 39,000 jobs. The job losses were disproportionately felt in two industries – accommodations and food (28.1% decline), and arts and entertainment (27.3%) – that were most challenged by physical distancing. With the exception of government, however, no industries were spared. Health care’s job declines were especially surprising, given that the downturn was produced by a health crisis.”

With our focus on the number of jobs lost, there has been less awareness that wages in Montana did not decline in the same manner. On average income levels were minimally impacted. The reason:  jobs lost tended to be lower paying jobs, and in many cases Montanans who retained their jobs were called upon to work more hours.

Much of the data relating to the status of the state’s economy is still coming in, making projections for 2021 difficult. 

While the BBER’s forecast for 2020 was a growth rate of 2.3 percent for Montana, the reality is it may have declined to -2.1 percent. Not all the Montana data is in, but when it is “the growth rate for 2020 is estimated to be worse than the Great Recession of 2008-09.”

Nationally, COVID uncertainties make for greater unpredictability, but a decline in COVID concerns and greater confidence, “could make actual growth surpass the projections.”  Posing as a concern is the long-term impact on business of the “aggressive” actions of government.

The US economy will move slowly into 2021, accelerating as the year progresses. Growth next year is projected to be 4.2 percent “significantly above the long-term trend.”

Barkey predicted that investors in the national economy will focus more on segments of the economy connected to government, such as environmental and social issues. Banks, globally, will face greater risks, prices are likely to rise on finished goods and stabilize for services, which were pushed down by depressed demand.

Around the State, COVID Impact Much the Same

3 February 2021
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The economic impact of government imposed regulations due to the COVID-19 virus was much the same in every corner of the state of Montana. There was far greater differences in economic activity between different areas of the state before COVID, than what appeared after.

All of the 2020 declines across the state were historically large, reported Patrick Barkey, Director of the Bureau of Business and Economic Research (BBER) at UM, during the Montana Economic Outlook virtual seminar.

“The small differences between cities largely stem from the relative size of the accommodations and food services in their local economies, which bore the brunt of COVID-related business declines,” according to Barkey in the Montana Business Quarterly.

Another factor that played a role in the differences was the degree to which government jobs sustain a community’s economy. Few if any government jobs, at any level of government, were suspended during the shutdowns on business and associated jobs in the private sector. So, for example, for that reason, Helena in Lewis & Clark County would fare better.

But Lewis & Clark County was not recession proof during the COVID downturn, according to Barkey. “The shutdown in schools helped produce the opposite – a disproportionate contraction in government employment and wages that produced more pain than elsewhere. This was partially offset by strength in retail and stability in health care. But the largess of the CARES Act brought plenty of federal spending into Montana in general, which bodes well for Helena’s immediate future.”

Lewis & Clark is among urbanized counties that most readily align with the average of the state’s economic performance. Other counties include Cascade, and Silver Bow.

The education, information and media sectors of Cascade County were more impacted by the economic restraints of the pandemic than most. The county’s retail sector, which serves a “large swath of north central Montana” held up better. The county, which is home to some of the most productive farmland in the state, can probably expect a better year for farm revenues, “thanks in part to government support programs.”

Because Silver Bow County has risen in prominence as a tourist destination in recent years, its economy was particularly impacted by the COVID crisis. Although, Silver Bow’s economy has been somewhat volatile in recent years, “Its earnings overall have always been greatly influenced by the wages and bonuses paid by its remaining mining employers, and the recent strength in copper prices augers well for the immediate future for that sector.”

The “high-flying county” of the state has been Gallatin County “for the better part of two decades, excepting the real estate collapse … during the Great Recession”.  Gallatin County has had the strongest rebound in the state, according to Barkey, who pointed to a 50 percent recovery of its passenger air traffic as an indicator.  As indicated by non-farm earnings, Gallatin County “has averaged annual growth of 6.3% since 2013. Only Madison County has  topped that growth in the same period. The Bozeman area’s economic strength comes from its university, access to Big Sky Ski area, and Yellowstone National Park. In recent years, it has received a boost from high-tech, professional services and manufacturing growth.

Yellowstone County is among the counties that have economic performances above the statewide average. Although the largest, and previously the state’s fastest growing economy, Yellowstone County “has tailed off of late.”

Prior to the oil price collapse of 2014-15, Billings enjoyed strong growth that reflected the economic conditions of the four-state region, for which it serves as a commercial hub. Both of its economic engines, energy and agriculture enjoyed very good years in the aftermath of the Great Recession.

“As a county with no oil reserves, Yellowstone’s connection to Bakken oil fields and other energy and mining activities is less apparent, but its numerous, high paying, mining, construction and other support services jobs have had a huge influence on the overall fortunes of the local economy. The Bakken’s thankfully brief, but severe, downturn in the months after the oil price turbulence of early 2020 creates more uncertainty for this part of the economy. The strength of the goods side of the national economy in the midst of this downturn and the emphasis on supply and logistics plays to the strengths of the Billings economy. As pandemic disruptions ease, the region’s health care industry, by far the state’s largest, should get back on track as well,” reported Barkey.

Overall growth in Flathead County has averaged 3.8% since 2013, second best of the state’s largest urban areas. Spending by nonresident visitors eclipsed wood products manufacturing in importance as an economic driver several years ago, although the latter’s presence remains significant, particularly in Columbia Falls. Flathead County also represents a key node in the state’s manufacturing landscape. The pandemic-related closure of the Canadian border immediately to the north has been an extra challenge for the economy in 2020.

Although hampered by enrollment declines at the University of Montana, Missoula County will likely be buoyed by growth in university research and growth in high-tech and professional services. It’s had an average growth of 3.6 percent since 2013.

The County’s recent growth history has suffered due in part to a decline in enrollment at the University of Montana, and the impact of the Great Recession. But, both Missoula and Ravalli Counties have experienced improvement since then. Missoula County lost its claim as the second largest to Bozeman, but, said Barkey, “… that says more about the growth in the latter than weakness in Missoula.”

About less populated areas of the state, Barkey said, “The oil patch counties … can expect to feel further fallout from the uneven performance of that commodity over the course of 2020, just as the coal producing areas bordering Wyoming have been challenged by the gloomier prospects for that economic driver.”

Other areas, especially along the northern border, have been helped by growth in government jobs and wages that occurred in 2020.  The out-migration of younger people toward cities remains a challenge to nonurban Montana.