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Hoeven proposes 2-year budget

BISMARCK - With state coffers awash in cash and no end in sight to generous revenues, Gov. John Hoeven on Wednesday proposed a two-year budget that hikes spending for education, pours funds into one-time projects and offers a tax cut - all while ...

BISMARCK - With state coffers awash in cash and no end in sight to generous revenues, Gov. John Hoeven on Wednesday proposed a two-year budget that hikes spending for education, pours funds into one-time projects and offers a tax cut - all while boosting the state's reserves to $412.7 million by June 30, 2009.

The $188 million for one-time projects includes a$42 million construction project to renovate the State Penitentiary and a $9 million research greenhouse at North Dakota State University. Hoeven proposed that these and other construction projects be paid for up front, with no bond issues.

"Our budget contains no tax increase, no fee increases and no borrowing or bonding," Hoeven told a joint session of the Legislature Wednesday. "In fact, our budget provides real tax relief to the very people who produced our surplus in the first place: the citizens of North Dakota."

The tax relief is $116.7 million from oil tax trust funds to trim homeowners' property tax bills by 10 percent and business and farmland owners' by 5 percent each of the next two years.

Lawmakers, in town for their organizational session, said the budget is unlike any other because of its combination of big spending, zero tax increase and yet, a reserve that grows. They will take up Hoeven's budget when they return for the start of the 2007 session on Jan. 3.

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"We're in new territory here in North Dakota," said Rep. Rick Berg, R-Fargo, the House majority leader and a legislator since 1985. "We've never had this strong a financial picture in North Dakota."

Sen. Ray Holmberg, R-Grand Forks, chairman of the Senate Appropriations Committee since 1977, said, "Overall, it was an exciting and upbeat message, a lot of positive things going on in the state," even though Hoeven did not fund everything everyone sought.

The budget includes$80.5 million to public schools, in a plan that changes how school districts get state money. It fulfills an agreement that will see dismissal of a lawsuit nine school districts filed against the state claiming inequitable funding.

Hoeven also laid out an additional $52 million to the state university system's operating budget, $16 million more for one-time funding for deferred maintenance needs and other needs, and $14.5 million for buildings.

Hoeven said his recommendation "comes closer to (the board's) requested budget than ever before." It is not all the state Board of Higher Education had sought, but Holmberg said it is more than he expected the governor to propose.

"I thought the governor laid out a pretty good plan," said Senate Minority Leader Dave O'Connell of Lansford. But he noted that, like other governor's budgets, "It's only a guide" to lawmakers' final decisions.

"What we don't agree with is some of the numbers not enough (money) in some areas and too much in others," he said. "We're going to have more money in reserve than we ever dreamed of if the economy keeps going that way."

O'Connell and other Democrats said funds proposed for catching up on deferred maintenance on college campuses is not enough.

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"That's a cancer, and it's not going to get any less expensive," Sen. Larry Robinson, D-Valley City, said.

Holmberg predicted the prison will create major discussion. Hoeven proposes tearing down a 100-year-old cell house and building new facilities such as an infirmary.

Some lawmakers think the prison needs an all-new facility in a new location, not an expensive rehab to a complex that has been cobbled together over 120 years on Bismarck's east edge.

"If we put $42 million in there, that's where we're going to stay," Holmberg warned. "It is not energy efficient and it's not personnel efficient."

Associated PressReaders can reach Forum reporter Janell Cole at (701) 224-0830

north dakota budget proposal

- Roads: The Department of Transportation would get an extra $20 million from the state's general fund for road repairs, maintenance equipment purchases, and information technology projects.

- Corrections: The spending plan includes a $42 million proposal to demolish and replace the main Bismarck state prison's east cell house. The Department of Corrections and Rehabilitation would get 29 new employees, including five guards and a business manager for the James River Correctional Center in Jamestown.

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- Peace Garden: The International Peace Garden, which straddles the Canadian border north of Dunseith, would get$1.5 million to help build a new interpretive center and almost $1 million for deferred maintenance projects.

- Oil outlook: Hoeven's budget forecasts an average oil price of $50 a barrel from July 1, 2007, through June 30, 2008, followed by a decline to $45 a barrel by June 2009. Oil production, now about 113,000 barrels a day, is expected to gradually rise to 119,000 barrels daily over two years.

- Oil revenues: An oil tax trust fund is expected to end the current two-year budget cycle with a balance of $128.3 million, and collect another $167 million during the2007-09 budget period. Once the money to finance property tax cuts is paid to county treasurers, the fund will be left with$178.6 million, estimates say. Another$71 million in oil tax collections is ticketed for the state's general treasury.

- Veterans: The budget continues a bonus program for North Dakota veterans of the active-duty armed forces, reserves and National Guard. Bonus eligibility is expanded to soldiers in National Guard units who do not live in the state. It provides payments of $100 for each month of overseas service, and $50 for each month spent stateside. Wounded soldiers are eligible for $2,500, and the heirs of soldiers who are killed may receive $2,500.

- Tobacco: Hoeven wants to set aside $551,600 for a program to discourage youth tobacco use, financed by the state's community health trust fund.

- Flu drugs: The Health Department would get $2.3 million to stockpile antiviral drugs, which would be immediately available to fight flu outbreaks.

- Greenhouse: North Dakota State University would get $9 million to build a research greenhouse on campus.

- College incentives: Individuals could deduct up to $5,000 from their state income tax for contributions to North Dakota CollegeSave, a so-called "529" plan that allows investment earnings to grow without being taxed. Couples could deduct up to $10,000. The Bank of North Dakota will also offer up to $250 in matching contributions to individuals who begin an account and have less than $20,000 in income, or couples who have less than $40,000.

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