Montana researcher says recession has hit state

HELENA, Mont. - A researcher said that the recession has clearly hit Montana, although the state is still expected to do better than much of the country.

Patrick Barkey, with the University of Montana's Bureau of Business and Economic Research, reported to a meeting of businesses and policy makers that Montana is caught in the widening economic downturn.

But Barkey said the recession has been slow to hit Montana, and he expects the state will outperform the national average through the recession.

"The bottom line is that we are going to outperform the U.S., but we are still going to feel plenty of pain," he told the Montana Taxpayer's Association at a meeting in Helena on Thursday.

Overall, Barkey said the widening global recession is expected to be a bad one. Experts don't expect housing markets to turn around until late 2009, and the national economy is expected to shrink.

Barkey said key Montana industries like tourism, mining, agriculture and construction will all be affected.

David Ewer, the governor's budget director, said Gov. Brian Schweitzer has adjusted spending plans to deal with an anticipated downturn in tax collections, which fiscal analysts expect to drop below levels seen in the last two-year budgeting period.

Ewer said that Schweitzer is pushing for large reserves in case the downturn is worse than expected.

"We have a challenge here, and we will face it together," Ewer said.

Terry Johnson, legislative fiscal analyst, said there is little money to pay for anything above the current level of government service; and there is a great deal of risk that key sources of state revenue, such as oil revenue or capital gains taxes, will decrease more than expected.

Johnson has predicted that tax collections could drop by about $40 million for Montana's upcoming two-year budget period. And the projected surplus for that budget period, which ends in mid-2011, is down by about $500 million to roughly $287 million.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.