North Dakota Budget Issues Loom in Second Half of Legislature

By Tom Gerhardt, NDU Director of Public Affairs

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

Storm clouds are on the horizon in North Dakota.

Higher education faces the most significant cuts: 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. Over 600 full-time equivalent (FTE) positions will be cut or left unfilled. Real people will lose jobs. The question is, how many?

Gov. Doug Burgum’s budget proposal calls for no raises for public employees in the upcoming biennium and no increase for the per-pupil payment for K-12 schools. Burgum’s recommendation that public employees pay for 5 percent of their health-insurance premium has met resistance in the House and Senate, but could come up at the end of the session as lawmakers look for ways to balance the budget.

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

However, the most recent sales tax collection numbers are a better indicator of things to come. That news is not good. The number, released in January, represents collections from last December. Sharp says that they are off $40 million from a revised forecast.

“Even when the Legislature adjusted downward, it still missed that forecast by a bunch,” Sharp said. “So I think that is a concern. And the fact that that fourth quarter of taxable sales and purchases will be a major driver in the new revenue forecast so I mean just based on that I would not expect there to be any additional revenue that would surface as a result of the new revenue forecast.”

So when will we know more? The next revenue forecast will be delivered March 9. OMB has been working with Moody’s to produce the report, which will steer legislators to the end of the session. At worst, a bad forecast will mean more cuts. At best, lawmakers will continue to chart the course they set in the first half of the session.

“I think we are on schedule, and I mean if something happens and we have a little more, we’ll always be able to add some things rather than take away,” Senate Majority Leader Rich Wardner said. “It’s much easier to give back then to take away when you get this far in the process.”

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

Sharp says that, regardless of the forecast, 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 Governor Burgum 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.

North Dakota United President Nick 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,” Archuleta said. “All of the things that we have come to enjoy and to appreciate are on the chopping block in this budget.”

He 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 that want to attend school here,” Archuleta 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 as I mentioned 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,” Wardner said. “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.”

Sharp says it’s too early to tell. She points to the fourth-quarter taxable sales and purchases down around $40 million as an early indicator of what’s to come.

“Everyone is very nervous,” she said.