January 27th, 2015 Is It North Dakota’s Turn For Austerity? The sky isn’t falling, but the oil tax revenue bubble has definitely popped. The latest

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January 27th, 2015


Is It North Dakota’s Turn For Austerity?

Total Approps

It should mean that legislators need to really look on the increases in on-going spending that have been occurring for the last 8-years, and actually make cuts to general government spending where possible – and shift that money to make sure that the one-time spending that is needed and was guaranteed to the Bakken region makes it there to catch up during this downturn.

To sum it up, the on-going spending increases of Governor Dalrymple’s budget are pretty much out the window at this point.

The one-time spending features for the Bakken infrastructure will probably be ok, but will need to be highly prioritized and have much more stringent cost over-run controls attached.

The gravy train for unlimited state spending isn’t running anymore, and legislators need to make sure they did not already ride it too long.

The Effect On Tax Cuts

One big area that will be affected is the various tax cut proposals. Already some pundits are waving the white flag of surrender, saying the plan to zero-out the state income tax will likely be set-aside. While that may be, supporters of that plan should not give up too easily – after all, if the declines in oil prevent large tax cuts, why should the massive spending of the past eight years be fine?

Just this week, the House Finance and Tax Committee heard testimony on the various income tax cut plans.

I spoke in favor of continuing down the road of cutting income taxes as a means of creating a “soft landing” for this economic downturn the state will be feeling, just as the national economy is rebounding.

I told the committee:

We can zero-out the income tax, either immediately or in phases – to say that we can’t because we don’t know what will happen with oil tax revenues ignores the fact that question was not applied to the rate the legislature increased spending in recent years.

If zeroing out immediately is too difficult to do, a phase out plan that gives the next session the ability to re-evaluate the 1st phase of tax cuts, without reversing the reductions would be acceptable. Or, basing the phases on triggers of overall revenue would be acceptable.

The middle ground, from both a reform and relief standpoint is HB 1296 which takes us to a Flat Tax with medium-sized exemptions for everyone at the bottom. (In my view, the exemptions should be larger, but the overall reform structure of the bill is very good.)

(House Bill 1296 was introduced by Rep. Kim Koppelman (R-West Fargo), co-sponsored by all Republicans, but is very similar to the plan the last Democratic candidate for tax commissioner proposed – an idea which Democratic House Minority Leader Kenton Onstand endorsed.)


Times are changing in North Dakota, as many of us said would eventually happen.

Legislators who, for four sessions now, have been able to spend nearly endless supplies of oil tax revenue, (and the added sales/income tax revenue that went along with it) will now have to learn to say no to every new program and spending idea.

Those pushing for significant tax cuts might have to be willing to compromise due to how the focus all these years has been on increasing spending - however, advocates of tax relief should not give up an inch until advocates of spending increases back off as well. A slowing economy needs more liquidity not less - continuing to reduce taxes shows businesses that our state can be trusted to still improve the tax climate even when there is a slowdown.

This is not a bust, it is a slowdown.

Just as the market must be corrected from time to time, so too do public spending priorities.

Legislators will have to tighten up the definition of "priorities" as that has grown to mean a lot more than just "needs".


-Dustin Gawrylow, Managing Director

North Dakota Watchdog Network

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