Republican Lawmaker Sues Schweitzer’s Office Over Tax Rebate

By Greg Lemon, 11-01-07

State Sen. John Cobb, R-Augusta, filed a lawsuit on Tuesday with the District Court in Helena claiming Governor Schweitzer and his office have their accounting principles wrong in authorizing a tax rebate for homeowners.

The center of the complaint is House Bill 9, the bill passed during the May special legislative session that gave homeowners the $400 refund. Attached to the bill was language stipulating that should the state’s general fund exceed $1.802 billion, another rebate would be triggered. The rebate would be for 2007 state income taxes and amount to about $140 per home.

Cobb’s complaint states that Schweitzer’s staff didn’t use “generally accepted accounting principles” in determining the final amount for the state’s general fund for the fiscal year 2007, which ended June 30. If they had used generally accepted accounting principles, they would have determined the state general fund revenue for 2007 to be $1.769 billion—not enough to trigger the tax rebate.

The debate centers around which accounting techniques should be used to determine the final revenue numbers for 2007.

Montana Republicans went on the attack in late September claiming Schweitzer “cooked the books” for political gain. In an article published in the Billings Gazette in September, Schweitzer’s budget director David Ewer, defended his office saying: “My office looked at the letter and the spirit of that law. We came up with what we thought was the right trigger meeting the letter and the spirit of the law.”

Cobb’s suit claims that Schweitzer’s office included revenue it shouldn’t have in determining the 2007 tally. As evidence, he included an e-mail chain between Terry Johnson, a legislative fiscal analyst, and accountants from the Department of Administration. In the e-mail chain, accountant Paul Christofferson wrote that the revenues should be done by using generally accepted accounting principles. By using these principles the state revenue for fiscal year 2007 would be $1.769, Christofferson wrote.

To get to the larger number that triggers the second tax rebate, Cobb is claiming Schweitzer’s staff used “transfers, proceeds of general fixed asset disposition and inception of lease amounts,” which according to Cobb and to Christofferson’s note, should not be factored if using generally accepted accounting principles.

Cobb is seeking a ruling that would overturn Schweitzer’s decision to process the tax rebate based and acknowledge that Schweitzer didn’t follow the legal guidelines set out in the HB 9. Cobb is representing himself in the lawsuit and didn’t return e-mails or calls by publishing time Thursday.

Schweitzer defended his position saying: “It’s the dangedest thing. I’ve now cut so many taxes that the Republicans are suing me to stop me from cutting more.”

He said that the bill’s language was vague on how the trigger for the second tax rebate could be met. However, he trusts his budget department and is certain they’ll prevail in the suit.

“My instructions to my staff is we’ve got money and we’re trying to give it back to the taxpayers,” Schweitzer said.