The budgeting process for government entities is never an easy endeavor. Prioritizing unending lists of needs and wants, while balancing that against existing and future funding sources, is not an exact science, as anyone who has served on a government body can tell you.
In North Dakota, the budgeting process is even more quirky since the state Legislature only meets every other year. So whether you’re a school district, city, township or county entity, you only get a shot to address needs every two years when it comes to state funding requests.
Now throw in the wildcard that can completely unravel a government budget and send those involved with the planning and forecasting into a total frenzy – initiated measures and constitutional measures.
There is currently one constitutional measure that is on the ballot for the upcoming Nov. 4 general election. Constitutional Measure No. 1 establishes a permanent oil tax trust fund and imposes limits on the use of money in the fund.
The measure states all revenue during a biennium generated by taxes imposed on oil and gas production and extraction which exceeds $100 million must be placed in the permanent oil trust fund. The fund principal may not be spent without a vote by three-fourths of the state House and Senate, and not more than 20 percent of the principal may be spent during any biennium. Interest earned by the fund is to be transferred to the state general fund at the end of each fiscal year.
State Office of Management and Budget Director Pam Sharp said as a result of this measure, $300 million to $400 million could be lost to the general fund each biennium. She also said the interest to be earned on fund deposits would not be significant.
An initiated measure that’s approaching its petition circulation deadline that would reduce state personal and corporate income taxes also would have a significant impact on state revenues. Proponents of this tax measure have until this coming Monday to turn in the required 12,844 signatures to get the item on the November ballot.
Sharp said if this initiated measure were to pass, it could cut state revenues by about $400 million per biennium. Combine the impacts of these two measures alone, and most of the state’s funding “surplus” is gone.
An initiated constitutional measure that’s being promoted would limit budget increases above the prior year for state and local governments to nothing more than the Consumer Price Index without a vote. The vote would be at the next regularly scheduled general election and would require approval by 60 percent or more of the affected voters.
North Dakota general elections are in November of even-numbered years. Secondly, there also are concerns any increases in revenue sources could not be accepted by state or local governments if it increases spending beyond the CPI.
In recent years, we have strongly encouraged everyone to take the time to participate in the public meetings where these budgets are being discussed and formed. We more strongly encourage such participation this year, as local governments face even more perplexing challenges.
Local government budgets must be submitted for tax levy purposes prior to the outcome of the upcoming November general election. So our elected officials truly don’t know what level or form state support may be until after the ballots are all counted in November.
Many government officials will be anxiously waiting for an announcement Monday regarding the initiated income tax measure. Stay tuned.