LOS ANGELES -- Montana law-makers concluded a special session Saturday by approving revenue-raising measures and spending cuts to close a $100 million budget shortfall, paving the way for a state note sale in September.

Gov. Stan Stephens called the special session, which began July 6, to address the gap in Montana's fiscal 1992-93 biennial budget. Lower than expected income tax revenue, combined with investment earnings sapped by low interest rates, helped generate the shortfall.

State lawmakers closed part of the gap by passing various revenue measures for the current fiscal year, Bob Marks, director of Montana's Department of Administration, said yesterday. The largest measure, a 7% surtax on almost all taxes except property levies, will produce about $28 million, Mr. Marks said.

Other revenue measures include imposition of a nonresident income tax and adjustments in state school equalization payments, he said.

Lawmakers also approved spending cuts totaling about $15 million, Mr. Marks added.

The adjustments helped Montana cover a cash deficit of slightly more than $100 million expected by June 30, 1993. To end with a positive cash position, lawmakers also elected to push half of a school equalization payment that is due in June 1993 into July 1993.

Since that change defers $38 million into the next biennium, and most of the revenue and spending adjustments are not permanent changes, Montana lawmakers could face a tight budget again when they prepare the 1993-95 biennial budget next year.

Montana officials initially planned a tax and revenue anticipation note sale earlier this month, but delayed the issue to await the results of the special session.

Mr. Marks said he expects Montana to sell the notes in September. He said the sale will likely range from $125 million to $130 million, subject to final cash-flow estimates.

Mr. Marks added that Montana is considering an alternative to selling the notes in the public market. Lawmakers directed state finance officials to study handling the sale internally by selling all or part of the notes directly to the Montana Board of Investments.

"It's an option," Mr. Marks said, adding that the decision on how to place the notes will be made soon.

In other action arising out of the special session, Mr. Marks noted that lawmakers approved restoring the power of the governor to reduce the state budget by certain percentages in the event of shortfalls.

A state judge ruled last year that Gov. Stephens acted unconstitutionally when he used a state law to order spending cuts in fiscal 1992. That decision prompted lawmakers in the special session to mull a new bill designed to satisfy the judge's concerns.

Mr. Marks said the governor probably will be unhappy with aspects of the recently approved bill because it contained amendments that impose restrictions on his budget-cutting flexibility. Nevertheless, Mr. Marks said those concerns probably will not be serious enough to lead to a veto of the legislation.

Investors should look favorably on the bill, Mr. Marks said, because it allows the state to respond promptly to unexpected budget deficits.

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