ND lawmakers face difficult decisions with forecasted revenue shortfall
BISMARCK -- North Dakota general fund revenues are projected to fall $46 million short in the two-year funding cycle that ends June 30, state budget officials told lawmakers Thursday.
The forecast presented March 9 predicted a dimmer outlook than the assumptions lawmakers adopted in January, largely due to lagging sales and use tax revenue.
For the 2017-19 biennium that begins July 1, the forecast predicts $103 million less in general fund revenue than what was included in the January assumptions, $94 million of which is related to sales tax.
Lawmakers are more than halfway through the 2017 session, and agency budget bills have already moved through one chamber of the Legislature. The forecast, introduced by Gov. Doug Burgum, signals lawmakers will continue to face difficult budget decisions in the remaining weeks of the legislative session.
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The forecast predicted almost $4.78 billion in general fund revenues, including fund transfers, for the 2015-17 biennium and $3.58 billion for the 2017-19 biennium.
Pointing to a “double whammy” of depressed farm commodity prices and reduced oil prices, Burgum recapped budget decisions taken to plug a $1.4 billion revenue shortfall leading up to the legislative session.
“Today, I’m sorry to have to be the bearer of the news that the decisions are going to become even more difficult,” Burgum told the House and Senate appropriations committees. Pam Sharp, director of the Office of Management and Budget, said the forecast suggests $132 million is needed from the Strategic Investment and Improvements Fund to balance the general fund by June 30.
The appropriations committees will take up the forecast early next week, said Sen. Ray Holmberg, R-Grand Forks, chairman of the Senate Appropriations Committee.
Thursday’s forecast was another sign of a reversal in fortune for a state that saw a sharp increase in tax revenue and government spending on the heels of the Bakken oil boom.
Two years ago, lawmakers approved a budget with more than $6 billion in general fund appropriations. Burgum proposed a budget in January that included $4.62 billion in general fund spending.
Dan White, director of fiscal policy research at Moody’s Analytics, praised North Dakota lawmakers, along with Burgum and former Gov. Jack Dalrymple, for their handling of the budget.
“In many other states, quite literally the Capitol building would be gone at this point,” he said.
Wholesale reductions? Senate Majority Leader Rich Wardner, R-Dickinson, said it’s important that the projections lawmakers use are on the mark.
“We have left ourselves with no reserves to react like we did last time,” House Majority Leader Al Carlson, R-Fargo said. “So you better be darn close to right.”
Carlson said the Legislature isn’t looking to raise taxes or tap into the Legacy Fund for general government operations.
But Senate Minority Leader Joan Heckaman, D-New Rockford, said it may be time to look at using principal of the Legacy Fund, which lawmakers can tap after June 30, for specific purposes. That fund had a balance of almost $4.2 billion at the end of 2016.
“To say that we’re in a bind and we have no money and no options, that’s not the case,” she said.
Burgum, a Republican businessman who won his first term in office in November, again pitched his proposal to have state employees pay 5 percent of their health insurance premiums, which lawmakers have thus far rejected. Given the continued revenue shortfall, he said some of his budget suggestions should be back on the table.
“Coming from the private sector, this is not an uncommon concept,” he said.
Wardner and Carlson showed little appetite for reconsidering that proposal Thursday.
House Minority Leader Corey Mock, D-Grand Forks, said some of the assumptions included in the forecast were too optimistic, including the price of oil. For the 2017-19 biennium, the Thursday forecast predicts oil prices of $47.52 per barrel, down from $48 per barrel assumed in January, with production at 925,000 to 950,000 barrels per day.
“This isn’t a budget we can balance by reducing the supply room budgets,” Mock said. “If we’re going to stick with the current rates, make no changes to the revenue, we’re going to have to truly dig in and make some wholesale reductions in some of these budgets.”
Wardner praised the appropriations committees for tightening belts in the first half of the session. He predicted there wouldn’t be further across-the-board cuts but lawmakers may rely instead on more “surgical” ones.
“There is some flexibility and some moves available to us out there,” Wardner said.