Port: It’s the spending, stupid (and bad forecasting, too)

MINOT -- As I write this North Dakota lawmakers are fleeing the capitol in Bismarck after having met in special session to address holes in the state budget.Holes caused by falling, post-oil boom general fund revenues.Only those revenues probably...

Rob Port

MINOT - As I write this North Dakota lawmakers are fleeing the capitol in Bismarck after having met in special session to address holes in the state budget.
Holes caused by falling, post-oil boom general fund revenues.
Only those revenues probably haven’t fallen as much as you think they have. As the lawmakers were leaving Bismarck (I’m told the air conditioning in the legislative chambers, which isn’t used much since regular sessions happen during the winter, was something less than efficient) the Office for Management and Budget released their latest update on general fund revenues.
At the midpoint of the 2015-2017 biennium, our state has collected over $2.5 billion in general fund revenues.
Sure, that figure is down more than 13 percent - or about $384 million - from the previous biennium. And sure, that’s why Gov. Jack Dalrymple was forced to call lawmakers back to Bismarck to fix the budget.
But you have to remember that the previous biennium - the 2013-2015 biennium - was a revenue anomaly. An outlier. A budgeting cycle which saw a level of revenue that, from a historical perspective, was almost absurd.
The nearly $3 billion in general fund revenues collected at this point in the 2013-2015 biennium was about 13 percent more than what was collected in the 2011-2013 biennium and a 44 percent increase over the biennium before that.
The $2.5 billion collected so far in this biennium is actually about $24 million more than the 2011-2013 biennium, and about $1 billion more than the biennium before that.
Let that sink in for a moment. Despite the ugly headlines and the politicians all but resorting to sackcloths and ashes, the state’s general fund collections are still about $1 billion more than they were five years ago.
North Dakota’s problem isn’t revenues. The state is still collecting more than enough to pay for necessary spending, especially now that needs driven by the oil boom have receded along with oil-boom-driven revenues.
These facts run contrary to certain narratives we see emanating from public officials who don’t want spending cuts and politicians who are ideologically opposed to smaller budgets.
But the problem is, in fact, spending. Our state policymakers matched booming revenues with booming spending. They fashioned budgets based on ephemeral revenues driven by an oil boom that was never going to last forever.
It wasn’t entirely their fault. It was maybe like 85 percent their fault. We can also lay some blame with Moody’s Analytics which provides lawmakers with the revenue forecasts they use to budget. These folks simply have not been able to get the numbers right.
In the 2011-2013 biennium their revenue forecast understated general fund revenues by more than $1 billion. So far in the 2015-2017 biennium their May 2015 forecast - the one lawmakers used in their regular session to finalize the budget - is off by more than $580 million.
It can be tough to forecast revenues in a state economy as beholden to commodity prices as North Dakota’s is, but c’mon. A high school economics class could probably come up with a forecast that has a margin of error smaller than a billion dollars.
Anyway, what we’re learning, as the dust settles, is that North Dakota’s economy and tax collections are both going to be much larger post-oil boom than they were prior to the oil boom.
That’s a good place to be, and we shouldn’t let the fall down from peak oil boom years to this new normal obscure that fact.
Once the lawmakers fix the overspending problem they created - and the tinkering will continue into the regular legislative session which begins in January - North Dakota is going to have emerged from the oil boom years a stronger and more economically diverse state than ever before.
Port, founder of, a North Dakota political blog, is a Forum Communications commentator.

Related Topics: NORTH DAKOTA
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