Montana’s general fund revenues grew 4.1 percent in fiscal year 2026, significantly outpacing earlier forecasts that had projected a 1.7 percent decline, according to a report from the Legislative Fiscal Division shared with lawmakers at the June 24 Legislative Finance Committee meeting.

The stronger-than-expected performance was driven largely by income tax collections, which — combined with corporate income taxes — accounted for 77 percent of total general fund revenues in FY 2026. Total income reported on Montana tax returns rose 8.7 percent in 2024, providing the underlying growth that fueled state coffers.

A Shifting Economy Behind the Numbers

The report offers a detailed look at how Montana’s economy has transformed over the past several decades. Agriculture, which supplied roughly one-third of state earnings in 1950, now combines with mining to account for just 4.4 percent of the state economy. Mining alone contributed 5.2 percent of state earnings in 1950.

Manufacturing earnings have grown in raw dollar terms — from approximately $950 million in 1950 to $2.1 billion in 2024, adjusted for inflation — but manufacturing’s share of the state economy has fallen from 8.3 percent to 4 percent over the same period.

Real estate has become Montana’s dominant industry, contributing $12.2 billion to state GDP in 2026. Legislative staff noted real estate has held that top position for roughly two decades, now exceeding agriculture, mining, utilities, and manufacturing combined.

The luxury end of the real estate market is concentrated in a handful of counties. Madison County alone has 2,527 residential properties valued above $1.5 million, with a combined assessed value of $25.3 billion — more than all other Montana counties combined. High-end markets in Gallatin and Flathead counties also contribute significantly, while Lake and Ravalli counties hold comparatively small shares of the luxury segment.

Migration Slowdown and Demographic Pressures

The pandemic-era influx of out-of-state residents that drove much of Montana’s recent economic surge has largely run its course. Fewer than 6,000 people relocated to Montana from other states in 2024, a return to roughly pre-pandemic migration levels after the 2020-to-2022 rush.

Legislative staff flagged demographic pressures on the horizon as well. Montana’s population is aging rapidly, and healthcare has emerged as one of the fastest-growing sectors in the state economy — a trend that will likely shape budget conversations heading into the 2027 legislative session.

Gianforte’s Flat Tax Proposal in Focus

The revenue picture takes on added significance given Governor Greg Gianforte’s proposal to establish a 4.7 percent flat income tax. Legislative analysts estimate the change would reduce annual state tax collection by approximately $130 million by fiscal year 2029.

Because individual and corporate income taxes together make up more than three-quarters of general fund revenues, any structural shift in how that income is taxed carries outsized implications for state budgeting. The report notes that while budget pressures remain, the state is expected to enter the 2027 legislative session in a reasonably sound fiscal position.

The flat tax proposal will be a central debate when lawmakers convene in January 2027. Supporters argue it simplifies the tax code and rewards income growth; critics contend it would disproportionately reduce the tax burden on higher earners while narrowing the revenue base. The outsized concentration of high-value real estate — and the income associated with it — in a few Montana counties adds complexity to projecting who bears that burden.

What to Watch

The Legislative Finance Committee will continue monitoring revenue trends through the interim period. With migration stabilizing, an aging workforce, and a governor-backed tax restructuring proposal on the table, the state’s fiscal outlook will be shaped heavily by whether income growth sustains its recent pace.

Montana’s broader economic story — from the collapse of a proposed Bonner data center to the dominance of real estate in the GDP figures — reflects the tensions between the state’s traditional industries and the new economy taking root in its resort counties and Bozeman corridor.