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Montana Makes Right Moves Toward Improving the State’s Economy
Economy and Business Over the past year Montana has made several moves in the right direction toward improving the state’s economy, according to someone who ought to know, Dave Gibson, the state’s chief economic development officer.
Posted by: The Big Sky Business Journal
Most of the significant changes are the result of new laws that came forth from Montana legislature. "We didn’t get done everything we wanted but there were several big things that happened," said Gibson.
A bill that will eventually lower the capital gains tax rate was noted, by Gibson, as something that in the long term will play an important role in bringing new businesses to the state, as well as venture capital money.
The Small Business Survivability Committee (SBSC) Index placed Montana right at the bottom with its former tax on capital gains rate of between 9.1 to 9.3 percent. "This is how much you are going to be taxed when your investments pay off for you in Montana," explained Gibson. With the new legislation that rate will drop to 4.9 percent by 2006, placing Montana in about 24th or 25th position on the SBSC index chart.
At the same time Montana has "cleared up" what may have been primarily a perception problem, but it was a problem that served no purpose and could be easily simplified, according to Gibson. It was perceived that Montana had an 11 percent top income tax rate. While very few people ever had to pay that rate because of reductions offered, "everybody thinks you do," said Gibson. New legislation simplified the tax code so that the top rate now appears as 6.9 percent.
The other "big thing" for Montana, since it was the only state without one, the 2003 Legislature created the Workforce Training Act. The passage of HB 564 creates what Gibson calls "a good program to train workers."
Also, the Certified Communities Program, was revamped through new legislation. Previously, explained Gibson, we had a system in which small amounts of money were doled out for hundreds of community projects that couldn’t do much. It was not a very effective use of the funds, he said. Henceforth, ten to 12 regional areas will be established in the state, in each of which one lead economic development agency will oversee the use of the funds that will come to them in a larger amount. Rather than $3,500 to one town, the area will get $35,000. When it comes to economic development, "you aren’t going to win if it’s every little town for itself, we have to think of ourselves as a regional economy and that we have interrelated relationships," said Gibson. In this way about $420,000 will be focused on economic development in the state. "This is good structural change that will lead to what the state will have in ten years," said Gibson.
Among other good things that happened, according to Gibson, is that funding for the economic development agencies was stabilized. Funding that was supposed to terminate in 2005 was extended to 2010. That allows the agencies to maintain focus on what they are supposed to be doing rather than concerned about seeking more funding.
The Board of Investments was also given more flexibility in managing the revolving loan funds that were targeted to high-risk ventures. The program has had pretty good success in starting businesses, said Gibson, many have become more stable and are no longer high risk. The new rules allow the board the option of buying back the loans from the successful companies in order to make the money available to new high risk ventures. About 40 communities have about $40 million in revolving capital, according to Gibson.
Another change in financing was to make available another $40-50 million to help communities to leverage additional funding from the federal government. Federal programs make available to local development corporations money on a matching basis. Quite often, though, their communities do not have the matching funds. This program will make those funds available and "the state doesn’t have to crate these funds themselves," he said.
Two things that the state should now focus upon, according to Gibson, is to study the capital markets and figure out what policies Montana needs to change to encourage them to come to the state. Lowering the capital gains rate was just one step in that direction, according to Gibson, there’s more the state needs to do.
The state should also look at the structure of its economic development agencies, including Gibson’s office and the Department of Commerce and organize them in "a better and more efficient way," said Gibson.
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