Economic growth in service jobs, local leaders told

A meeting room on the campus of MSU-Billings seemed an appropriate place for a seminar on taxation and economic development Wednesday morning.

BY ED KEMMICK
of the Gazette Staff

The lecturers were University of Montana researcher Larry Swanson, who spoke of the "monumental" demographic changes sweeping the state, and state Revenue Director Kurt Alme, who outlined tax-reform proposals that will be recommended to the next Legislature.

The 45 "students" in attendance included about 15 state legislators from Yellowstone and surrounding counties and representatives of the Billings and Laurel city councils, the Yellowstone County Commission, the Billings Area Chamber of Commerce, St. Vincent Healthcare, Deaconess Billings Clinic, MSU-Billings and the Big Sky Economic Development Authority.

The gathering was sponsored by the Yellowstone Legislative Coalition, which works with local lawmakers to promote a unified approach to legislation before each session begins. The groups represented Wednesday make up most of the coalition, along with School District 2.

Swanson, associate director of the Center for the Rocky Mountain West at the University of Montana in Missoula, talked about the large, growing differences between various regions of the state.

The differences are widely recognized but usually misunderstood, Swanson said, and that "has tremendous implications when we gather in Helena and try to make policy."

Swanson began by sketching a picture of the "three Montanas" – counties generally west of the Continental Divide where rapid growth is the rule; central counties generally east of the divide, including Yellowstone, where growth has been moderate; and the eastern counties, which have been in decline for many years.

In Montana and elsewhere in the Rocky Mountain region, Swanson said, population growth and economic development have been taking place mostly in areas close to the mountains and to national forests and other public lands. Much of the growth has come from middle-age people migrating into those areas, bringing jobs and wealth with them.

In addition, he said, growth tends to cluster around regional centers made up of cities, their home counties and the counties immediately surrounding them. Billings is the largest regional center in Montana and well illustrates the economic changes taking place across the West, he said.

Although policy-makers continue to think of economic development in terms of traditional industries like mining and logging, Swanson said, the basic industries are almost all in decline, and the real growth is in service jobs.

But service doesn’t just mean waiting tables or selling trinkets to tourists, Swanson said. The new service economy in places like Billings involves lawyers, doctors, engineers, accountants and real estate agents.

That often goes unrecognized, he said, as does the importance of looking at the state region by region, rather than as a whole. Politicians wring their hands about the state’s low ranking in per-capita income, but cities like Billings, Missoula and Bozeman, where so many of the state’s residents live, compare favorably with similar-size cities in the region in terms of employment and per-capita income, he said.

Swanson said the state needs to acknowledge the economic strengths of regional centers like Billings and to tailor tax policies and labor training to the needs of specific areas of the state. One way to do that is to give cities and counties the power to levy local-option taxes, he said.

"What we don’t want to do in Montana is economic development through the rear-view mirror," Swanson said.

Alme, a Billings lawyer picked by Gov. Judy Martz to head the Department of Revenue two years ago, said local-option taxes are likely to be one of a trio of tax-reform proposals the Martz administration will present to the 2003 Legislature.

Last spring, Martz appointed three advisory councils to recommend tax-policy changes. The only requirements she placed on local-option taxes, Alme said, are that they be subject to local votes and that they be levied on the same items that would be taxed under a statewide tourist tax.

Which statewide tax is that, you ask? That’s another leg of the administration’s proposals, to impose a "limited sales tax" – "tourist tax" has too many ugly connotations, Alme said – on certain goods and services.

Those would include prepared food, drinks, accommodations, rental cars, recreation fees, souvenirs and a few other goods and services. Alme said projections are that out-of-state visitors would pay 56 percent of the tax and Montanans would pay 44 percent. Even if the state levied a 4 percent limited sales tax, Alme said, it still would rank last in tax collected from tourists on vacation, compared to nine other states in the region.

The money collected from that tax would offset the loss of revenue resulting from the third and final tax-reform proposal, which calls for cutting state income taxes by 10 percent, reducing income-tax rates and slashing the state’s effective capital gains rates, which Alme said are the highest in the region.

Alme said tax reform is long overdue in Montana. Although various reforms have been pitched over the past two or three decades, he said, selected taxes have been cut but no reforms have ever been adopted.

Ed Kemmick can be reached at 657-1293 or [email protected]

Copyright © The Billings Gazette, a division of Lee Enterprises.

http://www.billingsgazette.com/index.php?id=1&display=rednews/2002/11/14/build/local/75-econ.inc