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N.D. tax revenues fall $33M short in April, worst month yet since revised forecast in January

BISMARCK - North Dakota's tax revenues fell $33.4 million short of projections in April, the worst month yet since the state budget office adopted a lower revenue forecast in January to adjust for plunging revenues blamed on depressed oil and far...

BISMARCK – North Dakota’s tax revenues fell $33.4 million short of projections in April, the worst month yet since the state budget office adopted a lower revenue forecast in January to adjust for plunging revenues blamed on depressed oil and farm commodity prices.

The Office of Management and Budget reported $214 million in tax revenues and transfers last month, 13.5 percent below what was projected in the January revised forecast.

The April report leaves revenues $53.7 million, or 2.3 percent, below forecast so far this year. Revenues were $13.8 million short of projections in March, $20.3 million short in February and $1.4 million short in January.

“One can only hope that we’re going to bottom out,” OMB Director Pam Sharp said Friday.

Sales tax revenue took the biggest hit again last month, coming in 32 percent, or $26.9 million, under forecast, as crude oil prices haven’t rebounded far enough to revive drilling activity in the Bakken. North Dakota had only 25 active drilling rigs on Friday, down from 80 a year ago and 188 two years ago.

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On a positive note, Sharp pointed out that oil tax revenues exceeded estimates by $23.3 million on March production and also beat estimates by $10.5 million for the three months before that, which the budget office attributed to oil production remaining above 1.1 million barrels per day and the West Texas Intermediate crude price rebounding from the $20s in February to about $48 per barrel Friday.

“But it’s just the price is not strong enough and long enough to get more rigs out there and get the fracking going,” Sharp said.

Sustained low farm commodity prices also are taking a big bite out of sales tax revenue, Sharp said.

“This is probably a time when farmers would be out buying things, but the prices are so low, this is probably hampering those things as well,” Sharp said.

The January forecast projected a $1.07 billion revenue shortfall, prompting Gov. Jack Dalrymple to order about $245 million in budget cuts for most state agencies and use reserve funds and a built-in ending fund balance in the current budget to cover the remaining shortfall.  

The next revenue forecast is due out in July or August and will show whether more budget cuts are required before current biennium ends on June 30, 2017, while also providing the first look at projected revenues for the 2017-19 biennium, Sharp said.

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