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Dalrymple calls for hold-even budgets

BISMARCK — As North Dakota sits on billions of dollars in oil tax revenues, Gov. Jack Dalrymple called on state agencies Wednesday to develop hold-even budgets for the 2015-2017 biennium but left the door open to requests for more money to meet growth-related needs.

It’s the second time his executive guidelines have directed agency heads to hold the line on spending. But unlike in 2012, when Dalrymple also asked leaders to suggest 3 percent spending cuts, the guidelines presented Wednesday invite agencies dealing with rising demand for services to submit an optional two-year budget that may include additional staff or other increases.

Before requesting more staff or other increases, leaders of the state’s 73 agencies should consider ways to leverage or prioritize existing resources, look to consolidate programs and “eliminate efforts that no longer fit our priorities,” Dalrymple said.

“We want to avoid painful adjustments if our economy were to slow down in the future,” he said.

Dalrymple said state government must spend within its means, provide tax relief and maintain healthy reserves, and his guidelines “lay the groundwork for a conservative approach to the budget process.”

“During times of strong economic growth, we must be especially mindful not to create an overly expansive government that becomes a burden to those who follow us,” he said. “I am committed to holding the line on ongoing spending while recognizing that we must also meet the many needs driven by a growing population and the nation’s strongest state economy.”

Senate Minority Leader Mac Schneider, D-Grand Forks, called the governor’s guidelines a “very soft call” for hold-even budgets and predicted that Dalrymple’s executive budget won’t be hold-even.

Schneider said some areas need greater participation by state agencies, such as state rail inspectors under the Public Service Commission to protect public safety and assure customers and the oil industry that Bakken crude will be transported safely.

“We should always look for ways to save money, but I think we also need to be realistic in terms of identifying needs out there, too,” he said.

A similar hold-even directive from Dalrymple in 2012 did little to restrain state spending.

The 2013 Legislature ultimately approved $4.6 billion in ongoing appropriations, a 30.9 percent increase over the $3.5 billion in spending the previous biennium. Lawmakers also approved about $2.4 billion in one-time spending, for a total of nearly $6.8 billion – roughly a 59 percent increase over the total authorized spending of almost $4.3 billion for 2011-13, according to the Office of Management and Budget.

The 2012 guidelines drew criticism from Democrats who said they didn’t recognize the critical needs of communities struggling with growth and flooding. At the time, the state’s general fund had a projected ending balance of $600 million. The actual ending balance was just under $1.4 billion.

OMB Director Pam Sharp said Wednesday she expects the general fund will have an ending balance of around $500 million by June 30, 2015, which will be used for one-time expenditures in 2015-2017. Revenue collected during the first nine months of this biennium was about $145 million ahead of the May 2013 legislative forecast, mostly because of increases in individual and corporate income taxes that reflect the state’s wage growth, she said.

Dalrymple said there’s a misconception that the state’s budget challenges can be easily remedied with the strong revenue from oil and gas taxes, noting that only 6 percent of it is available for ongoing operational costs. The general fund budget’s share of oil tax revenue is capped by state law at $300 million.

The rest of the oil tax revenue goes to counties and other dedicated funds, including the Legacy Fund, which receives 30 percent of oil production and extraction taxes. The fund’s balance as of last month was more than $1.9 billion, but lawmakers can’t touch it until 2017.

The state also is sitting on a $583.5 million Budget Stabilization Fund and a $433 million Foundation Aid Stabilization Fund for schools, but OMB Fiscal Management Director Sheila Peterson said those funds can’t be tapped unless revenue drop below projections, which hasn’t been an issue with the state’s economy booming.

Dalrymple said cuts in federal funding also are creating budget challenges, and the state is investing hundreds of millions of dollars into critical needs such as airports and highways that used to receive a larger share of federal funding.

Budget requests are due to OMB by July 15, though extensions may be granted.

Dalrymple will present his executive budget to the Legislature on Dec. 3, during its weeklong organizational session before the regular session begins Jan. 6.

Mike Nowatzki

Mike Nowatzki reports for Forum News Service. He can be reached at (701) 255-5607.