January 7th, 2016 The Budget Spin Machine Are state officials distorting the realities of North Dakota's budget situation? It should not come as a

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January 7th, 2016

The Budget Spin Machine

Are state officials distorting the realities of North Dakota's budget situation?


It should not come as a surprise that many in North Dakota's state government (both elected and appointed) want to minimize the long term realities of the continued oil price decline. However, it is important to realize that there is a spin machine in North Dakota just as everywhere else - and that many are playing the C.Y.A. game today.

Yesterday, it was announced that taxable sales in the 3rd Quarter of 2015 were 25% lower than Q3 of 2014. This was not shocking to anybody, and the 4th Quarter is likely to be even worse.

State Tax Commissioner Ryan Rauschenberger's press release on the subject framed it this way: “Although taxable sales and purchases for the third quarter are down when compared with 2014, viewing it with a longer-term perspective still shows an increase,” stated Rauschenberger. “Taxable sales and purchases for the third quarter have increased more than 31 percent since 2010.”

Not stated, of course, is that during the 3 legislative sessions since 2010, state spending has out-paced taxable sales 40% to 31% AFTER subtracting the 12% reduction in state spending in the 2015 session.

Taxable sales is one of the better measures of the economy as a whole, which means state spending, in the 2010-2015 time-frame the state tax department is choosing to use, has out paced the economy substantially.

General Fund Budget Increases
Oil Tax Revenue Chart

Another way state officials are spinning the budget issue is by referencing oil tax revenue that directly goes to the general fund.

According to Sheila Peterson, director of the Fiscal Management Division of North Dakota’s Office of Management and Budget, the falling oil prices are not crunching the budget as much as they are in Alaska.

“The only direct oil revenue that goes into our general fund is about $300 million out of a $6 billion budget,” Peterson told Fox News. “We still expect to get the $300 million from direct oil taxes.”

While true, it leaves out the fact that the funding mechanism for the 12% property tax relief credit is directly funded by the oil formula.

As well as the Strategic Investments and Improvements Fund, as well as another $631 million that is sent to political subdivisions in the state.

As long as these big ticket items are not counted, oil taxes have a minimal impact on the general fund budget - but this does not mean it will be any easier to fix the budget going forward.

Oil Spot Price

It is important to remember that no one is all that good a predicting commodity prices, but government in generally seems to be particularly bad at it.

One year ago, state officials were saying they expected the oil drilling rig count to stay above 100, some people knew better - like Jim Arthaud, who predicted the rig count would end up at 50.

Today, the rig count is at 54, and oil has hit a 12-year low with ND Sweet Crude listed at under $25.

Our state officials need to focus on coming up with long term plans to right the state's fiscal ship, rather than spinning the issues.

Previous Warnings On Budget


-Dustin Gawrylow, Managing Director

North Dakota Watchdog Network

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