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ND budget outlook shows revenues tracking 3.9 percent above 2017 forecast

New home construction in the neighborhood south of Fargo Davies High School. Home building in Fargo and West Fargo has been relatively flat during the last two years. File photo

FARGO — North Dakota officials expect modest growth over the upcoming budget for 2019 to 2021 as oil continues to rebound while the farm sector struggles with low prices and trade friction.

Joe Morrissette, director of the Office of Management and Budget, and Tax Commissioner Ryan Rauschenberger met Monday, Oct. 1, with local business leaders for input to help them draft the next revenue forecast.

"It really seems that we've seen the bottom," which came in 2017, he said. The state revenue picture has brightened this year, with a preliminary forecast calling for "fairly flat growth going forward" growth to 2021, he added.

The latest revenue report shows general fund revenues for 2917-19 through August are tracking 3.9 percent, or $105 million, head of the May 2017 legislative forecast.

Almost two-thirds, 65 percent, of North Dakota's revenues come from retail trade, wholesale trade and petroleum, according to state figures. Oil and gas, which soared to record levels of $6 billion in 2013-15, then fell, are expected to grow 6 percent in the 2017-19 budget.

The preliminary revenue forecast predicts minimal growth and a declining growth rate in retail sales, expected to grow 1.7 percent in 2019 but 0.7 percent by 2021. Wholesale trade should show moderate growth, 7.5 percent in 2019 tapering to 3.6 percent in 2021.

Retail sales in Fargo and West Fargo, which together comprise a fifth of sales statewide, have been "pretty significantly below projections in recent years," Rauschenberger said.

North Dakota's outlook for farm income is stable, but edging downward, weighed down by trade disputes, from 4 percent growth in 2019 to 2.8 percent in 2021.

Jim Roers, owner of Roers Companies, said construction and real estate development in Fargo are in the midst of a "reset," as the market absorbs surplus building stock.

"There needs to be a correction," he said. "It's going to take a couple, three years."

John Gunkelman, a homebuilder, said homebuilding has been "kind of flat the last two years." There has been a recent trend of home building outside the cities to escape high special assessments and flood-proof basement standards, he said.

Last year, building permit numbers were down 7 percent compared to 2016, while total permit value was down about 14 percent compared to 2014, according to Home Builders Association figures.

To improve revenue forecasts, OMB has expanded membership on the Governor's Advisory Council on Revenue Forecasting and is working with Moody's Analytics to develop the long-term forecast from three to five years, allowing budget decisions to be shaped by more of a long-term view.

Patrick Springer

Patrick Springer first joined the reporting staff of The Forum in 1985. He can be reached by calling 701-241-5522. Have a comment to share about a story? Letters to the editor should include author’s name, address and phone number. Generally, letters should be no longer than 250 words. All letters are subject to editing. Send to letters@forumcomm.com

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