Word Games Don't Help Taxpayers Or State April 13th, 2016 In recent weeks, there has been argument over North Dakota's budget situation. Not so muc

      Web Version   Preferences   Unsubscribe  
North Dakota Watchdog Network Logo

Word Games Don't Help Taxpayers Or State

April 13th, 2016

In recent weeks, there has been argument over North Dakota's budget situation.

Not so much over the numbers, but what to call it.

As anyone who has followed the North Dakota Watchdog Network knows, we have been ringing the alarm bell for a long time (see list of previous budget warnings below). Our positions have nothing to do with the candidates in the race, it is about the facts.

And the fact is, North Dakota is facing some major budget difficulties.

Back to the word games being played - the term shortfall accurately describes the situation in the CURRENT biennium. The details on what is being done with that are well established.

The term deficit is more appropriate when describing what the next legislative session will begin their business with in January 2017.

When you look at the rate of growth of the state's general fund spending, with the so-called "one-time spending" carved out, there is no denying that the first challenge of the next legislative session will be not having access to the kind of dollars they have had for one-time spending.

LC One-time v Ongoing
Revenue Shortfall Strategy

Another thing to know is that: while the 4.05% allotment cuts, as well as the draining of the Budget Stabilization Fund, and the zeroing-out of the Ending Fund Balance gets the state through this biennium - the starting point for the next legislature is well over a billion dollars lower than this current budget.

And that assumes there will not be further cuts needed when the August Update of the Moodys' projections come in. (The general consensus among oil industry experts and Republican legislators is that further cuts of between $250 million and $500 million will be needed. The longer lawmakers wait to make these possible 2nd round cuts, the steeper they will be due to less time left in the biennium.)

The next budget will likely also require federally mandated spending increases for Human Services, Education, and Transportation - not to mention salary increase expectation for all public employees.

That last piece related to salaries will be inflated due to the growth in the number of state employees in the last decade.

2003-2015 FTEs

The Need To Accept Reality

Taxpayers and voters in North Dakota must force their leaders to accept the realities that the state will face in the next legislative session.

Statements, by media outlets or elected officials/candidates, like this in the Fargo Forum, do not help the public make informed decisions:

Burgum also is exaggerating the economic challenges facing the state, which has seen the size of its economy soar in recent years, even as it has dipped from peak levels.

"You hear talk about gloom and doom and the sky has fallen," Stenehjem said. "It hasn't."

North Dakota's gross state product, $22 billion in 2000, shot up to $55 billion in 2014 and dropped back to $53 billion in the fourth quarter last year, it's second-highest level, Stenehjem said.

"What's important to know is we're kind of plateauing," he added.

The state is not experiencing a budget deficit because it has cut back on planned spending, paring just over 4 percent. The state invested $1.1 billion in infrastructure, one-time spending that is paid for, Stenehjem said.

Those sorts of statements ignore the budget balancing act that the legislature will be forced to make.

Yes, the states' economy has gone from $22 billion to $53 billion from 2000 to 2015 (140% increase).

However, the state's budget during that same period has increased much faster from $1.7 billion in 2003-05 to $6 billion in 2015 (252% increase).

Government has far outpaced the economy and some are finally realizing this was a long term problem.

Another more direct indicator of the condition of the economy is to look at Taxable Sales. A new report says that Taxable Sales fell from $28.2 billion in 2014 to $22.8 billion in 2015 - a 19% drop.

Ten of the 15 majority industry sectors saw reductions last year, led by the mining and oil extraction with a 38.5 percent drop, from $5.2 million to $3.2 million. Wholesale trade was down 27.4 percent.

General Fund Budget Increases

Our state government leaders must realize that things are changing - and assuming that the economy will return to its boom-time highs any time soon is irrational.

There may be areas where spending has to be curtailed as much as 25-30% in order to make way for increases that may be required and still make the next budget balance.

The dollars from the Budget Stabilization Fund and Ending Fund Balance that are being used to balance the 2015-17 budget will not be there next time. Nor will the dollars in the 4.05% cuts, and any future rounds of cuts.

There are too few elected officials willing to admit these issues to the public, and newspaper editorial boards who perpetuate this absence of facts are doing a disservice to the public, the state, and the very elected officials they are trying to protect.

One positive example of state officials accepting reality relates to the Bank of North Dakota. Back in February, we pointed out their plan for a $17 million expansion of their Bismarck campus.

The Bank of North Dakota, at the urging of the State Industrial Commission, has put those plans on hold.

It will do the state's leaders well to not hide the facts about the budget.

It's time to accept reality and get to planning how to deal with it. An eighty-day legislative session will not be enough time to fix the problems if there is not acceptance of the problems.


-Dustin Gawrylow, Managing Director

North Dakota Watchdog Network

Paypal Button