BISMARCK – Uncertainty over the price of crude oil and “sobering” projections for North Dakota’s oil tax revenues over the next two years spurred Democratic lawmakers Thursday to call for backup budgeting and a study of the state’s volatility in tax collections.
Senate Minority Leader Mac Schneider referred to a Legislative Council memo projecting the state could lose nearly $3.2 billion in oil tax revenue if crude prices remain between $44 and $52 a barrel through the 2015-17 biennium, and another $2.4 billion if oil extraction tax exemptions are triggered by continued low prices.
That would leave the state with about $5.6 billion less in oil taxes than the $8.3 billion projected in the December revenue forecast used in Gov. Jack Dalrymple’s executive budget recommendation.
Democratic caucus leaders proposed that lawmakers craft a contingency budget that funds priorities such as K-12 education and property tax relief, while allowing for funding building projects and other contingency appropriations if oil prices rebound and tax revenues return to projections.
Schneider, D-Grand Forks, said the aim is “to guard against an overreaction by state legislators, rather than an under-reaction.”
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“The sky is not falling here. We don’t have to say ‘no’ in addressing some of these critical needs that exist,” he said.
Sen. Connie Triplett, D-Grand Forks, said the two-part budget is still just a concept that needs to be fleshed out with appropriations committees and Republican leadership.
She said the idea would be to set up revenue-based trigger mechanisms for releasing contingent appropriations, or to give the Legislature’s Budget Section more power to approve them at certain intervals – though that could be more controversial, as some in the 141-member Legislature believe the 44-member Budget Section already has too much authority.
Senate Majority Leader Rich Wardner, R-Dickinson, said his party will take a conservative stand on the budget, “and we will have contingencies in there.” He said he had just received the Democrats’ call for backup budgeting and was still reviewing it.
“A lot of the philosophy in here looks like we kind of agree on it,” he said. “It’s just how we’re going to get there.”
House Majority Leader Al Carlson, R-Fargo, said he doesn’t want two budgets.
“Our intent is to try to get a realistic (revenue) number that we believe would be accurate and budget off that,” he said.
Democrats said that with state budget decisions increasingly relying on energy tax revenues, they plan to introduce a Senate resolution calling for a study of the volatility of tax collections and what can be done to mitigate its impact on the state budget.
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A report by The Pew Charitable Trusts found North Dakota had the fourth-highest tax volatility among states from 1995 to 2012, behind Alaska, Wyoming and New Mexico.
Pew found that while most state economies experienced the same ups and downs as the national economy from 1990 to 2012, a handful with more specialized economies, including Alaska, Louisiana, North Dakota and Wyoming, did not, the report stated.
