N.D. puts expanded budget to good use

“For existing programs, the Fiscal Year 2014 budget will again support modest increases rather than cuts,” the governor wrote last week.

“The budget will also allow a small amount of spending in other targeted areas.

“We must continue to be cautious, as many external factors ... could dramatically change our current projections.”

You don’t have to read very far into this budget letter to know that North Dakota Gov. Jack Dalrymple wasn’t the one holding the pen.

Instead, it was South Dakota Gov. Dennis Daugaard, who’s piloting a state that’s back on a steady but slow ascent after a scary drop during the 2008-09 recession.

And the contrast between the two governors’ budget messages last week is instructive. Because in North Dakota, as residents know, phrases such as “small amount of spending” and “modest increases rather than cuts” haven’t appeared in a governor’s address for several years.

Is that good or bad? And if it’s good, how can North Dakotans be sure that the budget increases can be sustained?

Those are key questions, maybe the most important facing North Dakota lawmakers as the 63rd Legislative Assembly gets ready to begin.

A quick look at the two Dakotas’ budgets shows how dramatically in North Dakota, times have utterly changed.

Here’s a telling statistic. In South Dakota, revenues are higher than expected, meaning Daugaard had some flexibility in assembling his budget. So, he’s leaving about 1 percent or $26 million of his two-year budget unappropriated, giving the state “room to move” if revenues fall.

In North Dakota, revenues are exceeding expectations, too. So, Dalrymple also has room to move.

But one room is a breakfast nook while the other is a banquet hall, because Dalrymple’s “ongoing revenues” line exceeds his “ongoing expenditures” line by a full $1.002 billion.

In North Dakota in fiscal year 2011, higher education was a $1.2 billion budget item; in South Dakota, the comparable number was $691 million, the Fiscal Survey of the States reports. In North Dakota, total state expenditures for FY 2011 were $5 billion, while the South Dakota figure was $3.8 billion. And so on.

South Dakota, by the way, seems poised for its own round of growth. The state’s Three Forks and Tyler oil formations await mapping and development. More immediately, Rapid City, S.D., and other western communities are close enough to both North Dakota and Wyoming’s energy fields to serve as hubs. “It’s a matter of diversifying our message” to include energy as well as tourism, said Ben Snow, Rapid City Economic Development Partnership president, to the Rapid City Journal.

So, South Dakotans eventually may wrestle with the question that’s dogging North Dakotans today: Are the budget increases both wise and sustainable?

The answer to both questions seems to be yes. First, North Dakota’s population is likely to hit 800,000 in some seven to 10 years, demographers say. The state flat-out needs more infrastructure, including not only western schools and highways but also eastern components such as an expanded medical school at UND.

Luckily, the state also has cash. It’s smart to use that money to pay for the build-out North Dakota needs.

Second, there’s a difference between one-time spending and ongoing expenses. So, if you take out the K-12 population’s growth and the federal government’s mandated Medicaid increases, both of which “are really not within our discretion,” you find that “our ongoing budget is going up at a rate of 5.2 percent a year,” Dalrymple told Fargo radio host Scott Hennen.

“We think that is responsible under these circumstances.”

Third, the state is amassing a warehouse of reserves. Between the Legacy Fund and several other funds, the reserves should grow to more than $5 billion as early as 2015. They could provide substantial income if it’s needed when a downturn comes.

Through their lawmakers, residents decided to use their oil-tax windfall in part to build the state up. North Dakota is a better place as a result; and like the oil boom itself, that improvement is a trend that shows no signs of turning back.­

Tags: opinion, editorials, budget