Budget Issues Loom Overhead

Revenue forecast further complicates funding for education, public services

By Tom Gerhardt, NDU Director of Public Affairs

There is a metaphoric dark cloud hanging over the state of North Dakota the last several months, and it is the uncertainty surrounding our state budget. Here we are just past the halfway point of the 65th Legislative Assembly, and serious questions remain about budgets for all state agencies.

Photo illustration by Kyle Locket, ND United

The latest revenue forecast released March 9 shows North Dakota is $46 million short for the remainder of the 2015–17 biennium, which ends June 30.

That’s what lawmakers have to work with as they head toward the finish line, sometime in April. The forecast for general fund revenues for 2017–19 also shows a shortfall of $103 million. In both instances, significant losses in sales and use taxes are the primary reason that revenue collection is down.

Gov. Doug Burgum addressed a packed Brynhild Haugland Room ahead of the forecast release and

told legislators, “The decisions are going to become even more difficult.”

Burgum also used the opportunity to make another public call for his proposal that public employees pay 5 percent of their health insurance premiums, which would save the state $11 million.

The governor did mention during the forecast the possibility of giving state employees a 1 percent raise in pay in the second year of the biennium, if revenue increases more than projected. Right now, no raises are on the table. And Burgum’s budget proposal calls for no raises for state employees, and no increase for the per-pupil payment for K-12 schools.

Burgum also continued his call to increase the cap on the amount of oil tax revenue that goes into the general fund, from $300 million to $900 million.

President Nick Arhculeta stated that North Dakota United will remain firm in standing up for public employees, and the budget should not be balanced on the backs of public employees.

“Now, given the most recent disappointing budget forecast, our Legislature faces a challenge of its own: how to serve the people of North Dakota without doing irreparable damage to the social fabric of our great state. It is time for reasonable solutions that ask for shared sacrifice and do not result in balancing the budget on the backs of North Dakota’s outstanding public employees,” President Archuleta said.

To this point in the session, higher education has faced the most significant cuts, at 20 percent across the board. Other agencies are in the 10 percent to 20 percent range, with all feeling the effects of a limited revenue stream. More than 600 FTE positions will be cut or left unfilled. Real people will lose jobs. The question is, how many?

Office of Management and Budget Director Pam Sharp said the budget status at Crossover (provided by Legislative Council) shows the state is $512,407,743 in the red. Sharp said that’s not unusual at Crossover. “At halftime, or at Crossover, the legislative budget status is always upside down,” Sharp said. “It’s always that way across the board. I think two years ago they were way over a billion upside down.”

Sharp says legislators were very conservative when they drew up projections in January. “Even when the Legislature adjusted downward, it still missed that forecast by a bunch,” Sharp said, and that she “would not expect there to be any additional revenue that would surface as a result of the new revenue forecast.”

Given this forecast, expect legislators to continue to be conservative with spending while moving forward.

“It’s much easier to give back than to take away when you get this far in the process,” Senate Majority Leader Rich Wardner said.

He says many tough decisions have already been made, but is quick to point out anything can happen at the end of the session.

Sharp says a couple of key things must be decided to balance the budget. One is how legislators decide to treat property tax relief.

“If they are going to go with that social services takeover, which means that would be permanent, ongoing expenditures, or if they’re going to continue with their 12 percent buy down, which they consider one-time money,” Sharp said.

The second decision lawmakers have to wrestle with is how much oil revenue money they will send to the general fund. In recent years, that number has been capped at $300 million. However, legislators have pushed that number to $400 million, while, as mentioned, Governor Burgum has proposed $900 million. Sharp says she expects the answer lies somewhere in between and won’t be determined until the waning days of the session.

NDU President Archuleta says the budget is about more than numbers, it’s about people.

“And these aren’t just people doing their jobs, they are providing vital services that help our kids, that help our elderly in our state, they keep our roads safe, they keep are wonderful system of state parks running. All of the things that we have come to enjoy and to appreciate are on the chopping block in this budget,” Archuleta said.

He wants to make sure legislators don’t do something in the short term to balance the budget that will have long-term implications. That includes higher education.

“We have to be very careful not to make North Dakota’s colleges and universities — which are terrific — less appealing to people from outside of our region who want to attend school here,” he said. “We want to make sure that the vital public services our kids have, whether it’s for mental health services, whether it’s for the parks or for funding schools — all of those things have to be protected in the long term. So, we have to be super careful about our short-term solutions to those problems.”

Senator Wardner agrees with the “people” part of the equation and hopes lawmakers end the session without having to add public employee contribution to health insurance premiums.

“We’ve got a lot of people that go above and beyond their job to help the state of North Dakota. Just think of the knowledge and the skills and the expertise that they have. There’s a reason this state runs very efficiently. I know some people don’t think so, but it does, believe me,” he said.

Archuleta agrees, saying he expected legislators to recognize what voters in North Dakota have for a long time.

“Public employees have provided the citizens of North Dakota with vital public services without fail, despite the loss of hundreds of colleagues through budget cuts in recent years,” he said. “North Dakota’s dedicated public employees work tirelessly every day to overcome the challenges associated with a growing workload and fewer resources to call upon to get the job done.”