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State revenue forecasts show a plateau

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The Dickinson Press
State revenue forecasts show a plateau
Dickinson North Dakota 1815 1st Street West 58602

BISMARCK -- After two years of rapid economic and population growth that lead to a $1.6 billion state surplus, the state is beginning to see signs that it is leveling off.

The Office of Management and Budget told lawmakers Tuesday the state is projected to see just more than $45 million less in state revenues during the 2013-15 biennium than what was originally forecasted, but an additional $41 million the state will gain this biennium should help offset the loss.

The lost revenue came as no major surprise to the members of the Senate and House Appropriations Committees during a joint session, where the OMB presented the statistics that also indicate North Dakota will likely see just more than $4.75 billion generated from state taxes during the upcoming biennium.

In 2011, the state underestimated the impact the Oil Patch would have on the state when forecasting revenues for 2011-13. The state originally had $3.27 billion coming in, but that number quickly jumped to $4.93 billion.

Gov. Jack Dalrymple told the room full of more than 40 lawmakers that "overall, I think you will find a 1 percent adjustment is nothing to be concerned about. This is not a change in growth, growth continues at a very strong rate."

The information is gathered by a collaborative effort among the state's tax department, revenue advisory group, OMB and Moody's Analytics, which helps measure financial risks.

Rep. Eliot Glassheim, D-Grand Forks, said the presentation seemed low-key with very few questions about the projections. "It was as if nothing much is happening," he said.

The lower dollar figure raised the question of whether the state should be looking at decreasing tax rates and similar issues, and be thinking more long-term.

"We came to expect things are going to grow exponentially, so to have a projection that is going to grow slowly is a wake up call," he said.

Sen Robert Erbele, R-Lehr, said nothing about the forecast truly jumped out at him, which indicates lawmakers and the state are catching up with the population and demands.

"It shows we are coming into maturity," Erbele said. "We had a huge spike and now things are settling in and the road we are going down now is the good road."

OMB Director Pam Sharp presented the data. She pointed to some key numbers that contribute to the state's overall economic success, such as low interest rates, strong wage rates and motor vehicle excise tax collections. The state is projected to add an additional $13.3 million in revenue from vehicle taxes for a total $324 million in the next biennium due to strong national vehicle sales.

But while many are driving new vehicles, the taxes coming from the Oil and Gas Production Taxes are projected to drop from $163 million to $133 million as a result of increased rig-efficiency, Sharp said.

She pointed out the efficiencies oil rigs are beginning to find, result in fewer job openings and the possibility of fewer oil rigs going up.

Erbele did raise some objection to the idea, knowing an additional 12 rigs will likely be up and running within the year.

"The efficiency may bring more rigs and people on," he said, talking about the allure technology may have to increase drilling.

Steven Cochrane, Managing Director of Moody's Analytics, spoke about how well North Dakota is doing and where it is projected to go.

He highlighted the two-thirds of state's jobs that are in services with the other one-third in goods, like extraction, mining and construction. Those were about even in 2011, he said.

The change easily reflects the increased employment in the Oil Patch.

But while many migrated to the west, Cochrane said fewer people are moving to rural areas and larger communities are beginning to see a slow acceleration of growth as a result.

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