A Montana Legislative Fiscal Division report released late last month said general fund revenue increased 4.1% in fiscal year 2025, largely due to the income tax, a significant change from a previously expected 1.7% decline.
Although the report notes that there are still “pressures” on the budget, the state should enter the 2027 legislative session in a strong position. The higher-than-expected revenue was good news for lawmakers as they head into a new fiscal year and worry about a cutback-ridden 2027 legislative session.
“I’m pleased that revenue came in higher than expected,” Rep. Llew Jones, R-Conrad, said Monday. “It’s a good sign that Montana is still functioning and we’re still getting higher salaries.”
Some of the report’s projections include a flat 4.7% income tax that Gov. Greg Gianforte has proposed that would reduce tax revenue by $130 million per year through fiscal year 2029.
“Montana is expected to enter the 2029 biennium broadly structurally balanced, but with narrower headroom compared to recent sessions,” the report said.
Jones reiterated that Monday, saying the state is expected to head into the 2027 session “structurally positive, but narrow.”
You can look at what Montana is doing from a revenue perspective this way a “Laffer curve”, He said, which basically says that up to a certain point, when the legislature increases taxes, the government brings in more revenue. If they tax high earners too harshly, they won’t come to Montana or stay there, and economic theory tries to find the optimal tax rate that stimulates growth but still fills state coffers.
Jones said you just have to look at the types of earners coming to Montana. Even those over 65 still bring wealth to the state, and tech companies like those near Bozeman are the industries the state is courting.
Asked how a flat tax might impact that, he said that would be the “challenge.”
“We have the cash flow and the Laffer effect is rarely quick,” Jones said. “It takes a while for more people to come in and more things to happen. I prefer the lowest tax possible and still have cash flow. I would hate to start on the wrong side of the curve.”
In fiscal year 2025, individual and corporate income taxes combined accounted for 77% of total general fund revenue. Total income claimed on Montana tax returns increased 8.7% in 2024.
Asked about the better-than-expected revenue, the governor’s office said in a statement that since taking office, Gianforte has worked with the Legislature to “keep Montana’s budget growth below the rate of inflation” and implemented significant tax cuts while helping Montana achieve a fast-growing economy. The Democrats planned these tax cuts, They say they only affect high earners.
“Through the governor’s leadership and focus on responsible, conservative fiscal management, Montana continues to have strong revenues,” the governor’s office said in a statement to the Daily Montanan.
The report further discusses trends and explains how potential legislative and national changes could impact the state budget.
Economically, real estate has been Montana’s largest industry as a percentage of gross domestic product for about two decades, contributing $12.2 billion to the state’s GDP in 2025. The report finds that real estate’s contribution to GDP is greater than that of agriculture, mining, utilities and manufacturing combined.
Essentially, the home building and transaction industry has become one of the most important factors in Montana’s financial well-being. Real estate GDP includes profits from the sale of houses and land. Expensive houses are also driving growth.
The high-end luxury real estate market is concentrated in Madison, Gallatin and Flathead counties. Lake County and Ravalli County also have a small proportion of high-end homes valued at $1.5 million or more.
Madison County has 2,527 residential properties valued at more than $1.5 million. These properties have a combined estimated value of $25.3 billion, which, the report notes, is “more than all other counties combined.”
As the luxury real estate market and tourism are on the rise as industries in the state, agriculture and mining have declined. In 1950, agriculture accounted for almost a third of government revenue, while mining contributed 5.2%.
According to the report, these industries are still important to Montana, but agriculture and mining combined now account for just 4.4% of the state’s economy.
“While real manufacturing revenues more than doubled from $950 million in 1950 to $2.1 billion in 2024 (in 2024 dollars), manufacturing’s share of Montana’s economy shrank from 8.3% to 4%,” the report said.
State officials have also taken birth rates and migration into account in their economic forecast. The report finds that migration to Montana slowed significantly after a major rush from 2020 to 2022 – back to pre-pandemic levels. According to the Legislative Finance Department’s calculations, fewer than 6,000 people moved to Montana from other places in 2024.
Montana, like the rest of the country, has a low birth rate. During a June 24 Legislative Finance Committee meeting where the report was presented to lawmakers, legislative staff noted that the state is aging rapidly. The graying of the state will lead to greater use of medical care, they said.
Health care is one of the state’s fastest-growing industries, staff noted in the report. A larger portion of Montanans’ income also more often comes from sources other than wages.
“Montana has a higher share of investment income, which includes dividends, rental payments and gains from the sale of investments, including residential property,” the report said. “The increases in this category may also be partly explained by the aging of Montana’s population, as individuals tend to build wealth as they age, but it also suggests higher average wealth levels than in the past.”
The report estimates that the Montana Department of Public Health and Human Services will need an additional $211 million in addition to current funding for the 2029 biennium to comply with “current law.”
That includes inflation, Jones said, and the report also includes “spending pressures,” things that the Montana Legislature may want to fund but doesn’t necessarily have the money to do so.
That includes $34.9 million for contract work at the Montana State Hospital, money that was eliminated at the end of the 2025 legislative session. The report also estimates that $63.9 million will be needed for “traditional and expanded Medicaid caseload adjustments” and another $54.4 million for “state matching rate” adjustments.
The DPHHS has expressed disappointment with the Legislature’s actions last session that created a gap in its budget. In an effort to close thisThe state canceled a planned 3% provider increase.
Some lawmakers, including Democratic Rep. Mary Caferro of Helena — a longtime Medicaid advocate — believe that with better-than-expected revenues, a “surplus,” as she called it, the money is there to sustain the benefit increase.
“The question becomes, why are they cutting Medicaid provider rates? I mean, if you don’t have the providers that can provide the services that people need, then you’re basically cutting services to people,” Caferro said Monday. “What is their reason? They can’t make do with the excuse that there isn’t enough money. That’s just complete nonsense.”
Sen. Laura Smith, D-Helena, said the expected revenue means the money is there.
“There is no excuse for cutting individual health care,” Smith said. “There is enough money. There is a question of the political will of this governor’s administration.”
Stricter federal regulations regarding error rates in the Supplemental Nutrition Assistance Program are also considered. The report says Montana will need nearly $50 million more to cover SNAP-related changes in President Donald Trump’s “big, beautiful” budget proposal, which he pushed the Republican-controlled Congress to pass and which he signed just over a year ago, on July 4, 2025.
https://dailymontanan.com/2026/07/06/more-montana-money-general-fund-revenues-increase-over-projections/
