Hoeven: N.D. budget strong despite national concerns

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BISMARCK — On the Legislature’s opening day, Gov. John Hoeven used his State of the State speech to give lawmakers a fresh pitch for his $7.7 billion budget plan, saying it remains sound despite a national economic slump.

“Clearly our nation’s economy is in a down cycle, and we in North Dakota are not immune from its effects,” Hoeven told a joint session of the North Dakota House and Senate, less than two hours after lawmakers began their 2009 session.

“As measures are under way nationally to hasten recovery, we here in North Dakota must undertake the right initiatives to build our future,” Hoeven said. “That means we must invest in our future with the kind of thoughtfulness and balance that the people of our state deserve.”

The governor’s recommendations, which he first unveiled for lawmakers last month, include ample budget increases for local schools and the state’s university system, tuition aid for college students, new child-care subsidies, and an expansion of a health insurance program for children of low-income families.

His proposal raises total state spending by 19 percent over two years, while reserving $100 million for a state income tax cut and $300 million to finance property tax rate cuts in North Dakota’s local school districts.

The budget includes $120 million in state general funds, which are mostly provided by taxes on sales and income, for road and bridge construction and repair. Normally, state road repair money comes from vehicle registration fees and taxes on gasoline and diesel fuel.

Democrats and Hoeven’s fellow Republicans gave Hoeven’s speech good reviews while sounding nervous about whether its revenue assumptions would hold.

“I think (Hoeven is) more optimistic than we are,” said Rep. Al Carlson, R-Fargo, the House majority leader.

“I think we should do what (Hoeven) said — money back to the people, build a strong reserve and fund our priorites,” Carlson said. “But we should be cautious in looking to the future, saying, ‘Maybe that reserve should be a little bigger.”‘

Hoeven said his spending plan would have an $800 million reserve in two years even if oil prices average $40 a barrel between July 2009 and June 2011.

Prices have dipped below that recently; on Tuesday, Tesoro Corp., which operates North Dakota’s only oil refinery near Mandan, was paying $34 a barrel for North Dakota sweet crude.

“I’m kind of concerned. I think the public’s concerned about what our revenues are going to be,” said Sen. Bob Stenehjem, R-Bismarck, the Senate majority leader. “They’re telling me to ... ‘be cautious with what you’re doing, remember that there’s another day, and let’s see where this is going.”‘

Rep. Merle Boucher, D-Rolette, the House minority leader, and his Senate counterpart, David O’Connell, D-Lansford, said a new set of state tax collection estimates expected next month could put a different cast on the budget.

“We do have a surplus. We do have an economy that is still on the positive side,” Boucher said. “Moving forward, though, I think we’re all looking to move forward with a great deal of caution.”

The two Democrats said Hoeven is supporting some longtime Democratic initiatives, including an eligibility expansion of the Children’s Health Insurance Program, which offers medical insurance to children of low-income families.

Hoeven may have more difficulty with his fellow Republicans with some of his proposals, Boucher said.

“We’re very willing to work with him to sustain what we have and to protect ourselves from some of the real difficulties that many, many other states ... are dealing with at this time,” Boucher said.

Hoeven, who won an unprecedented third four-year term last November with 74 percent of the vote, devoted a portion of his speech to celebrating the state’s economic growth during the last eight years.

Personal income growth has outpaced the national average, and North Dakota’s per capita income has risen from 38th to 26th among states, Hoeven said. North Dakota’s gross state product was measured at more than $27 billion last year, an increase of more than 50 percent from 2000.

State aid to education has increased so dramatically that it is on the brink of providing 70 percent of the support for local schools, a goal set by a 1980 initiated measure that has never been reached, the governor said.

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