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ND's tax revenue continues steep slide, boosting likelihood of more cuts

BISMARCK - North Dakota's lowered expectations for tax revenues proved to be not low enough for the third month in a row in March, leaving the state more than $20 million short of its revised forecast and boosting the likelihood of additional bud...

North Dakota Capitol in Bismarck. File

BISMARCK – North Dakota’s lowered expectations for tax revenues proved to be not low enough for the third month in a row in March, leaving the state more than $20 million short of its revised forecast and boosting the likelihood of additional budget cuts or further drawing down reserves.

The $98.8 million collected in March was $13.8 million, or 12 percent, less than projected in the revised revenue forecast released Feb. 1, which adjusted for a sharp decline in tax revenues blamed on the slumping oil and agriculture sectors.

Combined with revenues that were $1.4 million below forecast in January and $6.4 million below forecast in February, the March report left revenues $20.3 million short of projections.

“It’s a concern that we’re still down, but things haven’t changed out west,” Office of Management and Budget Director Pam Sharp said Friday.

Depressed crude oil prices continue to hamper oil drilling activity in the Bakken. The number of active drilling rigs remained at 29 Friday, down from 88 a year ago and 187 on the same date two years ago.


Drilling and the services that support it are major drivers of sales tax revenues, and it showed again in March, with collections coming in $13 million, or 20 percent, less than anticipated.

Sharp said it’s too early to predict whether state government will need to cut budgets further or draw more from the Budget Stabilization Fund.

Agencies that received general fund appropriations had their budgets cut by 4.05 percent, or about $245 million, in February to help balance a projected $1.07 billion revenue shortfall.

The state is offsetting the rest of the shortfall with a $331.7 million ending fund balance that was built into the 2015-17 budget and a $497.6 million transfer from the Budget Stabilization Fund, leaving the rainy day fund with about $75 million.

The next revenue forecast comes out in August. If it predicts the trend of lower-than-expected revenues will continue, “Then that would necessitate either more money from the Budget Stabilization Fund or a further allotment,” Sharp said, referring to the across-the-board cuts triggered when a new forecast predicts revenues will fall at least 2.5 percent short of the previous forecast.

Individual income tax collections in March were $5.1 million, or 68 percent, above the revised forecast. But Sharp said a truer picture of income tax revenues will emerge in next month’s report, which will reflect the April 18 deadline for filing tax returns.

“April will be a telling month,” she said.

State agencies will receive their budget guidelines for the 2017-19 biennium either late next week or early the following week.


“We do anticipate asking for reduced budgets,” Sharp said.

On a positive note, Sharp said the benchmark price of West Texas Intermediate crude oil has been higher than projected in the revised forecast, which assumed the price would increase from $30 a barrel to $43 a barrel by the end of the biennium on June 30, 2017. The WTI price hovered at about $44 a barrel Friday morning. Oil production also declined less than expected in February, down just 0.4 percent to about 1.12 million barrels per day, according to the Department of Mineral Resources.

“We’re holding own own on oil (tax revenues),” she said.

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

Related Topics: AGRICULTURE
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