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ND tax revenues fall $49M short in October; budget office talks about updating forecast

BISMARCK - North Dakota's tax revenues fell short of projections by nearly $49 million in October, marking the third consecutive month of lower-than-expected collections and prompting the state budget office to discuss updating the forecast given...

BISMARCK – North Dakota’s tax revenues fell short of projections by nearly $49 million in October, marking the third consecutive month of lower-than-expected collections and prompting the state budget office to discuss updating the forecast given to lawmakers in March.

Overall tax revenues are $112 million, or 7.5 percent, less than projected for the first four months of the 2015-17 biennium that began July 1, according to figures released Wednesday by the state Office of Management and Budget.

Depressed crude oil prices and farm commodity prices continue to put a major dent in sales tax collections, which came in about $38 million, or 31 percent, below forecast in October, after being down $23 million in September and $44 million in August.

Budget Director Pam Sharp said there’s nothing to suggest that collections will substantially improve in November.

“It is concerning,” she said. “It’s looking like it probably is a trend.”

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Sharp said OMB has initiated conversations with Moody’s Analytics about updating the revenue forecast, the first step in dealing with a potential revenue shortfall for the biennium.

“We wouldn’t want things to get too far down the road,” she said.

If an updated forecast predicts that the state won’t have enough revenue to cover its obligations, the first step is an across-the-board cut of up to 2.5 percent for state agencies, Sharp said.

Any additional shortfall would be covered by the state’s Budget Stabilization Fund, which contained about $572 million in August.

Sharp noted that K-12 education would be spared any cuts because of the Foundation Aid Stabilization Fund.

She said her office wants to see November revenues before pulling the trigger on an updated forecast by Moody’s Analytics, which has been repeatedly criticized by North Dakota lawmakers for its off-target forecasts. Moody’s wouldn’t begin the process until December at the earliest because it first needs the third-quarter taxable sales and purchases report from the state Tax Commissioner’s Office, she said.

House Majority Leader Al Carlson, R-Fargo, said he and other House lawmakers had pushed for Moody’s to lower its forecast for sales and income tax revenues last spring, but to no avail.

“I think now it’s holding true and proving that we probably should have lowered it some more,” he said. “That’s the polite way of saying, ‘I told you so.’ ”

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The state’s general fund balance at the end of the 2013-15 biennium was about $130 million more than was projected when lawmakers adjourned in late April. Carlson said it’s fortunate they built a $211 million ending fund balance into the 2015-17 budget, which provides some cushion against lower revenues.

“Obviously it’s going to be a whole different game when we come back in (2017), but the sky is not falling,” he said, adding, “It’s time that we’ve got to reel some of this stuff in a little bit.”

On a positive note, Sharp said, individual income tax collections were $3.2 million above forecast in October and are 7.3 percent ahead of forecast for the biennium to date, “which says that people are out there working.”

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