BISMARCK – Gov. Jack Dalrymple outlined a budget plan Wednesday, Dec. 7, that calls for 10 percent cuts for most agency budgets, preparing the state for slower growth to offset the oil boom and high farm prices of the past.
The proposal recommends a $13.48 billion total budget, cutting the number of state employees but keeping commitments to key priorities and building reserves. It includes $4.78 billion in general fund spending, a 21 percent reduction from the current biennium.
“We probably all agree that it is more fun to have a surplus of revenue than to have less revenue,” Dalrymple told state legislators during his final budget address. “We are forced to make hard choices about our priorities just like all North Dakotans make in their daily lives. Everyone will be challenged to find new ways of doing things.”
All agencies were asked to cut their budgets by about 10 percent, with departments of Human Services, Corrections, Highway Patrol and Indigent Defense receiving smaller cuts. Virtually all one-time spending from the past session was eliminated in the proposal.
The Legislature’s Budget Section delayed action Wednesday on accepting the budget recommendation, with Senate Majority Leader Rich Wardner saying legislators needed until the beginning of the session to fully absorb it.
“It’s a starting point,” said Wardner, R-Dickinson. “There are a lot of good things in this message, but we need to really dig down on some of the numbers.”
The unknown factor Wednesday was whether Gov.-elect Doug Burgum would make any budget recommendations after he takes office Dec. 15. Dalrymple told reporters he had some meetings with Burgum to discuss the budget picture.
“Despite a challenging revenue environment, Gov. Jack Dalrymple and his team have worked incredibly hard to put together this budget,” Burgum said in a statement. “The budget is being thoroughly reviewed by my team and we look forward to working with the Legislature to balance the budget and fund our priorities, without raising taxes.”
Under Dalrymple’s proposal, K-12 education funding would be “kept whole” by transferring reserve funds from the Foundational Aid Stabilization Fund.
The budget calls for a 15 percent budget cut to higher education funding, although 5 percent can be made up with tuition increases of 2.5 percent each year of the biennium.
The number of state employees would be reduced by 583 full-time positions – 315 fewer in higher education and 268 fewer in general government.
Those cuts would be made through attrition when possible and some agencies have already left positions vacant in anticipation of the cuts, according to the Office of Management and Budget.
“There will be reductions of existing employees and existing positions,” Sheila Peterson, fiscal management director, told members of the Budget Section. “It’s hard to tell exactly how many.”
For state employees, the budget proposal recommends no raise the first year of the biennium and a 1 percent raise the second year. The budget keeps the state’s commitment to funding family health insurance premiums for state employees, though there will be some increases in co-pays and other plan adjustments.
Dalrymple also recommends paying health insurance premiums for National Guard members while they’re serving on active state duty, a proposal that drew a round of applause.
Attendees gave a standing ovation as Dalrymple commended law enforcement and the National Guard for their response to the Dakota Access Pipeline protests, calling their performance “awe-inspiring.”
“Many of our people have gone months without a day off, ably managing the onslaught of out-of-state agitators in a situation that could never have been anticipated,” he said.
The budget directs all tobacco prevention programming to the Department of Health, a recommendation several anticipated would be debated during the session. It also supports Medicaid expansion, provides funding for a new child care facility licensing and continues tax relief that had been added in recent sessions.
Although the budget is significantly leaner than proposals Dalrymple outlined during oil boom years, he does call for additional investments in statewide infrastructure, including:
-$725 million in Department of Transportation road projects
-$20 million for the Williston airport and $4.1 million for the Dickinson airport
-$200 million in school construction loan funds
-$25 million for the communications and fine arts building at Valley City State University
The proposal returns $200 million of Bank of North Dakota profits to the state’s general fund, a practice that has been suspended since 2009 due to the booming economy.
The budget also transfers earnings from the Legacy Fund to the general fund but does not propose to use the principal of the Legacy Fund.
House Majority Leader Al Carlson said he’s glad legislators had set aside money for water projects, K-12 education and other priorities. He said he agreed with the proposal to reduce the number of state employees in light of the budget realities.
“The only way you reduce a budget in most cases is people and programs,” said Carlson, R-Fargo. “The key is you try to prioritize your spending in the right place and I think Jack tried hard to do that.”
Under the proposal, state reserves are projected to increase by $1.1 billion by the end of the 2019 biennium to about $6.3 billion.
Wardner said he wanted to look at that closer, questioning whether the state could afford to put as much into rainy day funds.
Senate Minority Leader Joan Heckaman said while she’s glad K-12 education wasn’t cut, she’s concerned about how schools will afford inflationary costs and raises for teachers. The proposal would not increase the per-student payment the first year of the biennium but includes a 1 percent increase in the second year.
Heckaman, D-New Rockford, also said she expects Democrats will work toward adding a salary increase for state employees.
“It’s going to be an interesting session. We’re going to have a significant amount of revenue to spend, similar to what we had four to six years ago,” she said. “But the needs are greater in the state of North Dakota, and that comes with an increased population.”
House Minority Leader Corey Mock was among Democrats expressing concerns about a proposal to adopt an assessment on long-term care providers.
At the start of his speech, Dalrymple noted the price of crude oil in August 2014 was $100 per barrel compared to $30 a barrel last February. He also noted the price of soybeans in May 2014 was nearly $15 a bushel compared to $8.76 a bushel last February.
“The kinds of price drops experienced in our two major industries of energy and agriculture are best described not as a correction but rather a collapse,” Dalrymple said. “Our economic advisers have told us there is no similar state in the nation that could have weathered such a collapse in commodity prices without serious impacts on their financial condition.”
The 2017-19 budget assumes an oil price of $61 a barrel for the West Texas Intermediate benchmark and average oil production of 900,000 barrels per day, said Pam Sharp, director of the Office of Management and Budget.
Some legislators questioned whether the revenue assumptions were too high.
“Isn’t that pretty wishful thinking there?” Carlson asked about the oil price during a Budget Section hearing.
Mock, D-Grand Forks, said agriculture prices and the strength of the Canadian dollar also play a major role in the state’s budget and need to be carefully considered as well.
Dalrymple, who became lieutenant governor in 2000 after serving 16 years as a state representative, said people often ask how he would like to be remembered as governor.
“I would like people to say ‘things happened when Jack Dalrymple was governor. Great things that will benefit North Dakota for decades to come.’”