Port: North Dakota's finances were strong before the coronavirus, but there are signs of trouble in the most recent revenue report
MINOT, N.D. -- What will the impact of coronavirus be on North Dakota's general fund budget?
We know it's going to be ugly, but we don't have a more specific answer yet.
On Wednesday, April 22, North Dakota's Office of Management and Budget released their monthly report for the state's general fund revenues .
If we look just at the numbers, forgetting for a moment the global pandemic which is wreaking havoc on our state and national economies, it's not a bad report.
It's downright pleasant.
To date, in the 2019-2021 biennium, general fund revenues are up 6.5%, or more than $121 million, over what the forecast lawmakers used for budgeting during their session at the beginning of last year.
Compared to the previous 2017-2019 budget cycle, revenues are up 17.1% or more than $290 million.
So far, so good, right?
This report covers through the end of March. The same month the coronavirus problem came to North Dakota.
- March 11 —North Dakota officials detect the first case of COVID-19
- March 13 —Burgum orders schools closed
- March 19 —Burgum orders businesses like bars, restaurants, and gyms to restrict operations
Given that timeline, how much of the impact of the coronavirus is going to show up in this report?
If we look at the specific revenue numbers for March -- particularly at the most significant tax revenue line-items in this report: the sales, individual income, and corporate income taxes -- we see that sales tax collections spiked in March compared to the same month in previous years.
Both categories of income tax collections saw a decline, however.
A pretty sharp one.
It's hard to know how much to conclude from these numbers. It's dangerous to compare any one month of revenues to any other month. Things like the weather can change shopping patterns and thus impact sales tax collections. Same with income tax revenues. Seasonal hiring may begin at different times each year, and the income tax code itself is forever in flux.
It would make sense for income tax revenues to be down, and sales tax revenues to be up because the three most substantial impacts the coronavirus has had on our state are a) people going shopping to stock up on supplies and b) businesses closing and c) people losing their jobs.
If you're wondering about oil tax revenues, given the chaos in the petroleum markets, remember that most of North Dakota's oil tax collections do not go into the general fund.
It's a little complicated, but the state's policymakers have created a series of funds (or "buckets" as they often call them) into which those revenues flow based on a complicated formula. The amount which hits the general fund is capped.
Most of the impact oil and gas activity has on the general fund comes from the income and sales tax revenues it drives.
This chart, from the OMB report , shows where we're at in filling those buckets in this budget cycle through the end of March:
You can expect the "filling" of these buckets to slow down very quickly. North Dakota's oil taxes are based on oil prices which are currently in the tank.
It's hard to know what to expect going forward, but as a frame of reference, many expect oil prices to stabilize somewhere in the $20 per barrel range.
North Dakota's budget was written on an assumed per-barrel price of nearly $50.
So it's terrible.
Very, very terrible.
The one good thing we can conclude from this report is that our state's finances were healthy before the coronavirus hit. Again, biennium to date, we were nearly $300 million ahead of the last biennium with a roughly $121 million budget surplus.
That won't last.
This might be our last pleasant revenue report for a while.
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Rob Port, founder of SayAnythingBlog.com, is a Forum Communications commentator. Reach him on Twitter at @robport or via email at email@example.com .