State's reserves predicted to hit $2 billionBISMARCK – No longer will North Dakotans be talking about the state’s billion-dollar surplus and reserves.
By: Teri Finneman, The Jamestown Sun
BISMARCK – No longer will North Dakotans be talking about the state’s billion-dollar surplus and reserves.
Instead, they can start talking about two billion.
The latest state finance report predicts a whopping $2 billion in surplus and reserves by June 30, 2013, the end of the biennium.
Office of Management and Budget Director Pam Sharp gave a financial update to legislators during the Budget Section’s meeting Tuesday in the Capitol. The state’s booming economy has resulted in stronger than expected revenues from sales taxes, individual and corporate income taxes, and other taxes.
Senate Appropriations Chairman Ray Holmberg, R-Grand Forks, called the state’s financial situation “astounding.”
“It just shows that the growth continues,” he said. “The difference between managing growth and stifling growth is a very fine line, and we have to be extremely careful as we go forward.”
Rep. Blair Thoreson, R-Fargo, called the finance report “great news” for North Dakota.
“It shows we’re doing the right things to keep our state moving forward,” he said. “It also means we have to be wise with what we do with those dollars.”
Both Holmberg and Thoreson discussed the need for the Legislature to look at further tax relief during the next session, as well as invest in infrastructure.
The state general fund balance is now expected to be $848.9 million on June 30, 2013, up from the $592 million predicted in March and more than double the $383 million December forecast.
Legislators can spend general fund money, so the $848.9 million would be available for the 2013 session.
North Dakota also has $1.2 billion in four special accounts, which have varying rules on how and when the money is spent.
Legislators will have at least $261.8 million to spend from the property tax relief sustainability fund. The fund’s balance is as of May 31, and it will continue to grow since the account receives money from oil and gas tax revenue.
There is $386.3 million in the budget stabilization fund – which can’t be accessed unless there is a revenue shortfall – and $204 million in the foundation aid stabilization fund. Interest from this fund is transferred to the general fund, where it can be used for any state appropriation.
The principal can only be spent under the governor’s order to offset foundation aid reductions to schools as a result of a revenue shortfall.
The foundation aid stabilization fund also benefits from oil tax revenue and continues to grow.
There was also $352 million in the Legacy Fund as of May 31, Sharp said. State Treasurer Kelly Schmidt said earlier this week the June deposit of $44.6 million brings the latest fund total to nearly $397 million.
The Legacy Fund receives 30 percent of oil and gas tax revenue and will continue to grow. Money from this fund can’t be spent until 2017.
During her report, Sharp said she wanted to clarify the $5 billion state surplus figure that’s been used in the public recently. The figure stems from the state's Comprehensive Annual Financial Report from June 30, 2011.
However, this report includes funds that cannot be spent for general purposes, such as the $2 billion common schools trust fund, she said.
This fund receives oil tax revenue and benefits K-12 education. To determine how much is distributed, the Land Department looks at the five-year average value of the trust fund and pays out 5 percent of that amount each year. The goal is to support multiple generations of students even after oil production ends.
Budget Section Chairman Sen. Tony Grindberg, R-Fargo, said North Dakota is in an unprecedented time.
As legislators head into the next session, Grindberg said it’s important for legislators to keep North Dakota residents informed about the facts surrounding the budget and the state surplus.
Taking a closer look at the state’s revenues, sales tax collections continue to shatter projections. The state collected $95.3 million in sales tax in May compared to the $57.9 million forecast made in April 2011.
So far this biennium, the state has collected nearly $953 million in sales tax revenue.
Oil and gas production and extraction tax collections in May were $157 million. Motor vehicle excise taxes were 35.3 percent stronger than expected, with $12.3 million in May revenue.
Overall, the state has $871.6 million more in revenue at this point in the 2011-13 biennium than it did at this point in the 2009-11 biennium. Sales tax collections make up $456.7 million of that difference.
Overall, the state expects to have general fund carryover and revenue of about $5.2 billion for the 2011-13 biennium and nearly $4.4 billion in expenses.
Teri Finneman is a multimedia reporter for Forum Communications