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N.D. water projects safe from budget cuts, but ‘tough prioritizing’ lies ahead

BISMARCK - Roughly a billion dollars' worth of water projects planned in North Dakota are safe from budget cuts ordered for most state agencies last week, but the state's chief engineer predicts some "tough prioritizing" during the next budget cy...

BISMARCK – Roughly a billion dollars’ worth of water projects planned in North Dakota are safe from budget cuts ordered for most state agencies last week, but the state’s chief engineer predicts some “tough prioritizing” during the next budget cycle if oil prices and production don’t rebound.

“We’re not planning to cut anything that anyone wants to build right at the moment,” State Engineer Todd Sando said Monday.

The State Water Commission receives no money from the state’s general fund and therefore is not subject to the 4.05 percent budget cuts that Gov. Jack Dalrymple ordered last week to help cover a projected $1 billion revenue shortfall for the 2015-17 biennium that began July 1.

However, the root causes of those budget cuts – slumping crude oil prices and downscaled drilling activity that have drastically reduced sales tax and income tax revenues – affect the commission more than other agencies because almost all of its funding comes from the oil-fed Resources Trust Fund.

The trust fund pulled in $950 million during the last four fiscal years, as under state law it received 20 percent of the revenue from the state’s oil extraction tax.

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Monthly deposits into the trust fund peaked at $31.6 million in September 2014 but have since dropped, to $12.2 million last month, said Ryan Skor, finance director in the state treasurer’s office. The fund began this year with a balance of $488 million.

An updated state revenue forecast released last week projects deposits will total $209 million in 2015-17 – less than half the $560 million collected last biennium and nearly $55 million less than what lawmakers expected when they finalized the two-year budget last spring.

Fortunately, one project that failed to materialize has left an obvious place to cut, Sando said.

Lawmakers had authorized $70 million to build a water reuse plant and study pipeline routes to support a proposed $3.3 billion fertilizer plant near Spiritwood, but CHS decided in August not to build it, partly because of water supply concerns.

“At this point, there’s no project. That money can be a good area for some cost savings right now,” Sando said.

The commission currently has $1.1 billion in spending authorization, including $664 million in new projects approved by lawmakers last year, Sando said.

When those projects move forward remains to be seen. The commission’s current budget has $396 million in unobligated funds, plus a $200 million line of credit from the Bank of North Dakota if needed, Sando said.

“We’re sitting good for cash this biennium,” he said.

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But with less than $200 million expected for the Resources Trust Fund next biennium and a long list of major projects with intent-to-fund language in state law – including Red River Valley water supply, $30 million for a water treatment plant for Grand Forks and $570 million overall for the $1.8 billion Fargo-Moorhead flood diversion project – the money likely won’t be enough to cover everyone, Sando said.

“We’re going to have to do some tough prioritizing again like we used to do,” he said.

During 2005-07, the last biennium before the current oil play, the trust fund received $25.8 million.

“It’s still a decent number,” he said of the current revenue projection, “but nothing like this big influx we had these past five years.”

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