keeping wealth in montana

Montana has a history of exporting its wealth. You might be surprised to learn just how much personal wealth we have accumulated over the past half century: $39.45 billion as of 2005 and over the next 50 years, that cumulative wealth opportunity is expected to reach $62.97 billion.

The Greatest Generation came back from World War II and began building our nation’s greatest period of economic growth and prosperity. Like so many Americans, Montanans bought homes, built businesses, invested in stocks and bonds, purchased second homes and other real estate, acquired life insurance and procured assets of every nature at unprecedented levels. That generation is now transferring its wealth to children and grandchildren. It is estimated that by 2016, $8.8 billion will transfer from one generation to the next.

If we could keep just five percent of that estimated $8.8 billion in Montana and invest it permanently, it would earn $22 million a year to support the charitable programs and services that make Montana communities places we love to call home. At the household level, if just $5,500 of accumulated wealth were gifted to community endowments, it would generate $275 per person every year to support community needs (1).

Montana’s Transfer of Wealth (TOW) Opportunity
Transfer of wealth is based on a 5% capture of total estimated personal wealth, with a 5% payout on earnings (typical amount distributed by institutional foundations).

2005 current net worth (wealth created over time)	$39.45 billion
10-year TOW estimate (2006-2016)	$8.84 billion
5% capture rate opportunity	$442 million
5% payout rate opportunity	$22 million

Transfer of Wealth by County

Click on the map below to see the 10 year projected TOW for your county.

The Urgent Need for Permanent Wealth

Montana and the nation are growing older and grayer (2). We are living longer and having fewer babies. There are fewer young people coming behind us to create and sustain the level of wealth and tax revenue that now exists. According to research conducted by the University of Montana’s Center for the Rocky Mountain West, Montana is projected to have one of the largest populations 65 and older as a percent of its total by 2020 (3).

Within the next 20 years, the number of young working families in Montana will begin to decline as the number of people 65 and over increases. Chart courtesy Dr. Larry Swanson, O’Connor Center for the Rocky Mountain West, University of Montana, using Census Bureau March 2005 projections

As Montanans over 65 increase, young working families (18-34) decline. Combine this demographic reality with projected shortfalls in Social Security and Medicare, and it becomes clear that our economy is on a collision course of our own making. There will be fewer discretionary dollars to support nonprofit work as nearly 40 percent of every worker’s paycheck will be needed to support Social Security and Medicare costs—double the amount needed today (4).

Current trends in nonresident ownership of Montana property may compound the problem. Nonresident ownership of residential property runs as high as 79 percent in Madison County, according to the Montana Department of Revenue; statewide, 20 percent of agricultural property and 16 percent of residential property is owned by nonresidents.5 It is safe to assume that most nonresident property owners will leave their wealth not in Montana but will pass it on to children living outside the state (5). And there is always the question about the degree to which nonresidents will become involved in community activities.
           
There is no better time to give back to the community that helped build your wealth, educate your children and saw you through hard times. People living in small, rural communities across America are discovering that they need to help themselves because no one else will do it for them.

We are all familiar with gifts made to alma maters, research centers, hospitals and nursing homes. All are deserving but many actually help people leave Montana by educating them for jobs outside the state or easing them out of this life. Transfer of wealth gives us an unprecedented opportunity to build our communities with a reliable source of unrestricted funding that will make them places where families with children want to live. Good schools, affordable housing, medical facilities, libraries, cultural and recreational attractions are all needed, and who better to make granting decisions to support these building blocks of community vitality than the people on the ground who see the need every day?  

Local community foundations are among the fastest-growing sectors of philanthropy and for good reason. People living in small rural communities across America are discovering that they need to help themselves because no one else is going to do it for them. There are more than 45 local community foundations already affiliated with the Montana Community Foundation, and we get calls every day from new communities wanting to start building endowments for their future. Existing local community foundations in Montana have already built a combined endowment balance of more than $4 million.

Imagine what $22 million a year could mean for Montana communities. Within just 10 years, it could mean expanded library hours and collections, new parks, pools and athletic fields, state-of-the-art medical equipment, literacy programs, art galleries and museums…all the things that make communities the places where people want to live and work and raise families.

BACK TO TOP

1Wealth in Montana, September 2006, part of the Montana Transfer of Wealth Analysis Project directed by the Community Assistance Initiative (CAI), an affiliated fund within the Nebraska Community Foundation. Montana advisers to the project were: Linda Reed, president and CEO of the Montana Community Foundation; Dr. Larry Swanson, executive director of the Center for the Rocky Mountain West; Doug Young, Montana State University; Mary Craigle, Montana Department of Revenue; Pam Harris and Susan Ockert, Montana Department of Commerce, Tyler Turner, Montana Department of Labor & Industry; Dick Gardner, Bootstrap Solutions, Boise, ID, and Ray Rasker, Headwaters Economics, Bozeman, MT.

2According to the U.S. Census Bureau, the proportion of Montana’s population 65 years and older was 6% in 1940; by 2000, that percentage had doubled to 13%, and by 2030, it is projected to double again to 26%.

3Current and Future Population Aging in Montana, a presentation by Dr. Larry Swanson, O’Connor Center for the Rocky Mountain West, University of Montana, for the Governor’s Conference on Aging, May 2008, Helena, MT.

4In 1960, there were slightly more than five income earners for every Social Security recipient. Today, the ratio is about 3.3 to one, and it is projected to fall to 2.2 by 2030. Social Security outlays are projected to rise from 11% of worker payroll today to 18% by 2040; Medicare outlays will triple from less than 6% to more than 18%. Source: Running on Empty (© 2004) by Peter G. Peterson, former U.S. Secretary of Commerce.

52007 assessed valuations of agricultural and residential property by the Montana Department of Revenue shows that more than 20% of Montana’s agricultural property tax bills and 16% of residential tax bills are being mailed to out-of-state addresses. Striking examples include Madison County, where 79% of residential property and 40% of agricultural property is owned, in terms of valuation, by nonresidents ; Park County, where 35% of residential property and 46% of agricultural property is owned by nonresidents, and Ravalli County, where 24% of residential property and 29% of agricultural property is owned by nonresidents.