Lawmaker ‘baffled’ by starting point for ND agencies’ 2017-19 budgets

BISMARCK - State agencies will be asked next month to build smaller budgets for the next biennium, but one lawmaker questioned Thursday why their starting point won't include the budget cuts made last month to help offset a more than $1 billion r...

BISMARCK – State agencies will be asked next month to build smaller budgets for the next biennium, but one lawmaker questioned Thursday why their starting point won’t include the budget cuts made last month to help offset a more than $1 billion revenue shortfall.

“To me it looks like we’re putting our head in the sand again,” Rep. Roscoe Streyle, R-Minot, said during a meeting of the Legislature’s Budget Section.

Agencies that receive general fund dollars were forced to trim 4.05 percent, or about $239.1 million, from their 2015-17 budgets in what’s known as an allotment. The legislative and judicial branches also agreed to turn back more than $4.5 million to help cover the shortfall, which state officials blame mainly on lower crude oil prices and reduced drilling activity that are cutting into sales and income tax revenue.

Office of Management and Budget Director Pam Sharp said it’s “a given” that budget guidelines scheduled for release in April will ask agencies to scale back.

“I don’t know what that percentage will be,” she told reporters.

Whatever it is, the percentage will be based on their original appropriation for the current biennium that began July 1, she told lawmakers. Streyle questioned the rationale, given that the budget lawmakers set last spring overshot revenues by such a large margin.

“It baffles me that we’re not going to start with the base budget as it sits now,” he said.

Sharp said the 4 percent cuts were “a stopgap measure” and might not be the same cuts that agencies would choose for the long term, adding more policy discussion is needed.

“We’ll still get to the same bottom line,” she told reporters.

After the nearly $245 million in budget cuts, the remainder of the $1.07 billion shortfall will be offset by a $331.7 million ending fund balance that was built into the budget and a $497.6 million transfer from the $572.5 million Budget Stabilization Fund.

Sharp said the transfer will be put off as long as possible until it’s needed for cashflow purposes – likely in the second year of the biennium – because the money earns more interest with the State Investment Board than it will at the state-owned Bank of North Dakota. A $71.8 million transfer from the $656 Foundation Aid Stabilization Fund was made Wednesday to cover the cut to K-12 state aid to school districts.

The next state revenue forecast will come out in August, and if it shows a continued slide, another transfer or round of budget cuts could happen, Sharp said.

In the last two budget cycles, Gov. Jack Dalrymple directed agency heads to develop hold-even budgets. In 2012, he also asked them to suggest 3 percent funding cuts, while in 2014 he asked agencies dealing with rising demand for services to submit options for additional staff or other increases.

The 2015 Legislature approved $4.9 billion in ongoing general fund spending, a 9.7 percent bump that was the lowest increase in four budget cycles. Combined with one-time spending, the total general fund budget dropped by 12 percent to $6.03 billion, though the overall budget with federal and special funds still grew from $13.7 billion to a record $14.4 billion.

Reach Nowatzki at (701) 255-5607 or by email at mnowatzki@forumcomm.com.