State Auditor James Brown requests IT modernization, outreach authority and expanded reinsurance spending authority

James Brown, Montana state auditor and ex officio commissioner of insurance and securities, told the Legislature's Section A budget subcommittee that his office is seeking additional spending authority for IT modernization, continued investor outreach and larger federal and state spending authority tied to the Montana Reinsurance Program.

Brown, who said he has served in the job for 15 days, described the auditor's office as a large revenue-generating agency that regulates insurance and securities, supports capital formation and handles consumer complaints. "The office is the 3rd largest generator of state revenue collecting just over 250,000,000 in revenue in fiscal year 2024," Brown said, and he told members the office contributed roughly $144,000,000 to the state's general fund in fiscal 2024.

Why this matters: the auditor's office administers regulatory reviews, the Montana Reinsurance Program for the individual insurance market, and pass-through funding for local police and firefighter retirement programs; changes to its spending authority affect insurer examinations, rate reviews and reinsurance payments that can influence insurance markets and consumer costs.

Budget totals and staffing Brown presented the agency's House Bill 2 request of roughly $11.3 million per fiscal year for operations, funded primarily by fees and special assessments rather than general fund dollars; the office said less than 1% of its budget is general fund and that most revenue is fee-based or special-revenue. The office reported 72.5 full-time equivalent positions (FTE) and is not requesting new FTE for the 2027 biennium.

IT modernization and outreach Brown asked the committee for authority to modernize legacy IT systems, requesting $300,000 in fiscal 2026 and $300,000 in fiscal 2027 (a total of $600,000) to improve systems and business processes. He also described a request for a dedicated outreach and investor-education appropriation. The agency proposed $50,000 per year for outreach; Brown told the committee he would support increasing that amount and said, "I believe this amount should, be doubled" so the agency can do more in rural communities and on reservations.

Montana Reinsurance Program and grant authority A significant portion of the auditor's proposed biennial budget is driven by the Montana Reinsurance Program, which the agency administers with federal grant dollars and a 1.2% state assessment on member insurers' premium volume. Amber Thorvaldson, the agency's chief financial officer, explained that the program receives annual federal award dollars and state assessment funds; the board that governs the program sets reimbursement parameters each year based on anticipated claims and available funding. The agency's budget materials show large grant distributions related to the reinsurance program (presented as roughly $62 million in fiscal 2026 and $70 million in fiscal 2027 in the subcommittee packet), and Thorvaldson said the state-side ending fund balance for FY24 was about $12.5 million.

Examinations and contract costs The auditor's office said it must examine authorized insurers at least once every five years by statute and relies on external contract professionals for some examinations and rate reviews. The agency requested increased state special revenue authority to cover rising contract costs for actuarial and exam services and annual reviews of long-term care, health, property and casualty rate filings.

Questions and context from committee members Committee members asked for historical fund-balance information and the office agreed to provide a fund-balance table and additional details. Budget analysts summarized the reasons for large federal and state special-revenue lines tied to the reinsurance program: federal awards are made annually and have increased in recent years while the state assessment (1.2% of premiums) has grown as premiums increased.

Ending No formal action occurred at the close of the hearing; Brown and his staff said they would provide additional fund-balance detail and follow up on any outstanding questions as the budget process continues.