Democrat seeks study to guard against revenue volatility

BISMARCK - With lower oil prices taking a $4 billion bite out of North Dakota's projected revenues, but still more than $10 billion expected to be sitting in the state's special funds by July, a Democratic lawmaker says it's time to study ways to...

BISMARCK – With lower oil prices taking a $4 billion bite out of North Dakota’s projected revenues, but still more than $10 billion expected to be sitting in the state’s special funds by July, a Democratic lawmaker says it’s time to study ways to protect against downturns in revenue.

Senate Minority Leader Mac Schneider, D-Grand Forks, said North Dakota could learn from other states that have conducted studies on revenue volatility similar to the one proposed in his Senate Concurrent Resolution 4024.

The resolution would require a legislative management study on North Dakota’s vulnerability to tax collections volatility and whether it’s feasible to combine existing funds or create mechanisms to mitigate volatility and its impact on the state’s budget.

A Pew Charitable Trusts report in February 2014 showed North Dakota had the fourth-highest revenue volatility among states from 1995 to 2012, behind Alaska, Wyoming and New Mexico.

The report said Utah has taken the most comprehensive approach to studying revenue volatility, requiring a joint legislative and executive study every three years and using two major budget reserve funds.


Schneider presented the Senate Finance and Taxation Committee with a list of 32 special funds projected to contain more than $10.3 billion combined by June 30, the end of the current biennium.

“Let’s see if we can consolidate one or two of these funds and maybe dedicate a fund to the specific purpose of guarding against a downturn in revenue collections,” he said, adding that while the state has done that some extent with its Budget Stabilization Fund and other rainy-day funds, “I think this is a perfectly appropriate thing to study on an ongoing basis.”

The committee’s chairman, Sen. Dwight Cook, R-Mandan, said most of the special funds were set up for specific purposes to ensure the money doesn’t run dry during a downturn in income.

“I’m pretty proud of how we handle (those) buckets,” he said. “I would argue with my friends from Utah that we do a better job than you do.”

Cook said he saw only four funds that would be available to lawmakers for the purposes Schneider was proposing: the Strategic Investment and Improvements Fund, Disaster Relief Fund, Property Tax Relief Sustainability Fund and Budget Stabilization Fund. Schneider didn’t disagree, and said perhaps the stabilization fund, which is projected to contain $584 million by July, needs to be beefed up.

The two senators disagreed over how much volatility would be reduced by lowering oil taxes in exchange for eliminating some price-based exemptions, an issue hotly debated last session.

Tax volatility is “not a theoretical issue” for North Dakota, Schneider said, noting revenue projec tions from oil and gas taxes drop from $8.3 billion to $4.3 billion between early December and late January. An updated revenue forecast will be released March 18.


Reach Nowatzki at (701) 255-5607 or by email at .

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