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Higher wages, new tax filers boost ND's bottom line

BISMARCK – Higher wages and substantial growth in the number of new income tax filers in North Dakota helped push the state’s tax revenue about $400 million higher through June than during the first year of the previous two-year budget cycle.

The state collected $514.4 million in individual income tax through the first year of the 2013-2015 biennium, nearly a 20 percent increase over the first year of the 2011-2013 biennium, state Budget Director Pam Sharp told the Legislature’s interim Government Finance Committee on Tuesday.

Sales tax collections saw the largest dollar increase, up $181 million, or 17.6 percent, to $1.2 billion.

Corporate income tax also was up more than $40 million for a 20.5 percent jump, while oil extraction tax revenue climbed by $41 million, or nearly 37 percent.

Total general fund revenues were up $407 million, or 16.2 percent, over the previous biennium’s first year, despite income tax rates going down 19.3 percent in 2013.

The higher income tax collections partly reflect growth in the number of new filers. There were 86,254 new filers with a combined net tax liability of $39.4 million in tax year 2012, and so far the state has recorded 73,556 new filers with a net tax liability of $16.7 million in 2013 – an amount that will increase as additional extension tax returns are filed through October, Sharp said.

The new filers include new residents who have flocked to North Dakota for jobs – many related to the state’s booming energy sector – as well as new graduates and existing residents who have joined the workforce, said Sheila Peterson, director of fiscal management for the state Office of Management and Budget and a member of the state’s census committee. North Dakota’s estimated population hit a record high of 723,393 on July 1, 2013, an increase of more than 22,000 over the year before, according to U.S. Census Bureau estimates.

“These are pretty solid increases,” she said of the new filers.

Income reported by existing filers also grew by $3.32 billion from 2011 to 2012, with about two-thirds of that increase attributed to wage growth, with the rest coming from dividends, interest, business income, rents, royalties and miscellaneous sources, Sharp said.

The wage growth generated an estimated $23.2 million in taxes, most of it realized in fiscal years 2012 and 2013, Sharp said. Income data for tax year 2013 isn’t complete yet, but it’s expected to show growth from all sources, she said.

The state started the current two-year budget cycle on July 1, 2013, with a general fund balance of $1.65 billion. After expenditures, the general fund is projected to end the biennium with a balance of $574.3 million – more than seven times the $80 million legislative forecast.

Sharp also gave lawmakers an update Tuesday on state agency budget requests, which were due July 15. Only 11 of the 70 agencies submitted their requests by the statutory deadline. The rest received extensions to as late as Oct. 10, and four of those have submitted their requests so far.

The committee’s chairman, Rep. Jeff Delzer, R-Underwood, questioned why OMB has the July 15 deadline if so many extensions must be granted. Sharp said some agencies request extensions because they’re waiting for additional information to determine their needs, and budget analysts also may grant extensions if they know they won’t be able to start working on the budget right away.

Reach Nowatzki at (701) 255-5607 or by email at