By Rep. Chet Pollert | Carrington and Sen. Rich Wardner | Dickinson
Recent articles in your newspaper and online editions by Mike Jacobs and Rob Port were factually incorrect on legislative budgeting and other issues. They said the Legislature wanted to delay recording of the Legacy Fund earnings from July 31 to Aug. 1 to make the state’s resources look smaller. That is simply not true.
First, the correct dates for biennium appropriation effective dates would be June 30 or July 1, but that isn’t the primary problem with the columns. The reason the Legislature wanted to make those changes was for several critical budgeting reasons, which will also make the process more transparent. The section of SB 2015, which the governor vetoed, stated that the funds would be recognized for the subsequent biennium rather than as revenue for the biennium that was just ending.
First is the cash flow issue. The financial experts at Legislative Council have been very clear that by not making the change to July 1, the funding associated with the earnings may be appropriated and spent before the cash from the earnings is available to pay for the expenditures. This could result in the general fund having insufficient cash to pay for the expenditures. This issue may become more of a concern as the earnings become a greater share of state revenues. We believe it is critical that the state has the funds on hand when the spending takes place.
Second are other budgeting issues. Under the current budget process, the Legislative Assembly must finalize the revised revenue forecast for the current biennium as well as develop the state budget for the next biennium prior to the earnings amount being known. Because the earnings are generated from the performance of investments, the earnings can be volatile making it difficult to determine a reasonable and reliable estimate. Any significant variance in the earnings affects the budgets of both biennia.
Third are the general fund balance issues. Recognizing the earnings on June 30 as part of the current budget could create other serious issues. If the investments experience significant losses in the last couple of months of the biennium, the final general fund balance could become negative. That could require the governor to direct agencies to reduce their budgets in the final days of the biennium.
The proposed change in budgeting was one of several the Legislature made or attempted to make to provide more transparent information about the state budget. We believe that is in the best interests of the taxpayers of our great state.
Pollert and Wardner are Republicans. Pollert is majority leader in the North Dakota House of Representatives, and Wardner is majority leader in the North Dakota Senate.