BISMARCK – Gov. Jack Dalrymple took the extraordinary step Wednesday of calling the Legislature into special session to plug a budget gap that’s projected to widen to $310 million by the end of this biennium, after already shoring up a more than $1 billion revenue shortfall in February.
Dalrymple issued an executive order for lawmakers to convene Aug. 2. Under the state constitution, they must meet for at least the three days to pass a bill, which Dalrymple said his office will introduce to the Legislature’s delayed bills committee.
He said he and legislative leaders from both parties agree that a combination of targeted, short-term budget adjustments and the use of some contingency funds is the best route for balancing the budget by the end of the biennium on June 30, 2017.
“I think we have an excellent plan for dealing with this shortfall,” he said at a Capitol press conference with GOP leadership.
“We feel that, at this point, something needs to be done,” Senate Majority Leader Rich Wardner of Dickinson said.
Dalrymple cautioned that “no one should get the impression that the state of North Dakota is in any way in a financial crisis,” noting the state still has billions in reserve funds, a strong bond rating and low debt obligation.
“It is still a very, very strong and very promising economy for the state of North Dakota,” the Republican governor said.
Still, his decision to exercise the seldom-used special session authority underscores the significance of a shortfall that continues to grow as depressed market prices for crude oil and agricultural commodities stifle oil and sales tax collections.
Dalrymple already ordered 4.05 percent budget cuts for most state agencies through an allotment process in February and authorized draining all but $75 million from the $572.5 million Budget Stabilization Fund to help offset a $1.07 billion shortfall projected for the biennium that began July 1, 2015.
Since then, tax collections are about $100 million below a revised forecast prepared in January. The latest revenue forecast released Wednesday projects a $310 million shortfall by biennium’s end without corrective action.
The next forecast is due out in November. Dalrymple wouldn’t speculate on whether that could necessitate further budget cuts, but added, “I am hopeful that we are near the low end of the cycle on this.”
Dalrymple said an allotment process may be used again, but he and GOP legislative leaders stressed that the cuts won’t be across-the-board like those made in February. For example, the Department of Human Services will be immune from the cuts, protecting mental health services, Medicaid and nursing homes from further reductions, Dalrymple said. The Department of Corrections and Rehabilitation also will receive special consideration in the budget plan, and K-12 school funding will be held harmless, he said.
While details have yet to be worked out, Dalrymple said the best option for contingency funds is the state-owned Bank of North Dakota, which posted its 12th consecutive year of record profits last year with $130.7 million in income and has seen its assets more than triple since 2006, to a record $7.4 billion.
“There is actually more capital in the bank than is really necessary,” he said.
Democratic-NPL legislative leaders, who began calling in March for a special session to respond more strategically to the shortfall but were rejected by Dalrymple, said in a statement Wednesday that the special session should be brief and strictly focused.
“We are glad the governor made the right choice for North Dakotans. We have been hearing countless stories from families across the state of the damage done by the budget cuts. We need the opportunity to address this before next session,” said Rep. Kylie Oversen, D-Grand Forks, the party’s chairman.
Dalrymple and House Majority Leader Al Carlson of Fargo both said it would have been premature to call a special session before receiving an updated forecast.
“Until you see that trend is going to continue … there really is no point in coming together before that,” Dalrymple said.
The need for additional cuts comes on the heels of unprecedented budget growth that accompanied the state’s oil boom.
The 2015 Legislature passed a record $14.4 billion state budget, including a $6.03 billion general fund budget that was more than triple the 2005-07 budget.
Some lawmakers complained last session that Moody’s Analytics’ assumptions for oil prices and drilling rig activity that went into the budget forecast were too rosy, and they’ve cautioned against letting it happen again. Last week, an advisory group recommended using lower figures for oil prices and production in the new Moody’s forecast.
Dalrymple also has asked general fund agencies to prepare 2017-19 budget requests that are 10 percent lower than their original 2015-17 appropriation, with some exceptions.
On a positive note, he said oil tax revenues are projected to end the current biennium $437 million higher than the January forecast.
“Although this does not have a direct impact on the general fund, we are very pleased to see this trending in a positive direction that will be meaningful as we prepare the 2017-19 budget,” he said.