Port: With budget problems looming, Gov. Burgum needs to call a special session of the Legislature to address coronavirus
MINOT, N.D. — Today begins another day with North Dakota's economy, in many ways, shut down.
Some businesses continue to operate, but many are shuttered or have curtailed their operations to comply with Gov. Doug Burgum's executive order limiting commerce, as well as further urging voluntary limits on social interaction.
These moves, agree with them or not, come with a price tag.
We're already getting an inkling of what the economic impact will be. Thousands of North Dakotans are losing their jobs.
During a recent press conference, state officials said an average daily number for unemployment filings in the state is about 80.
On Wednesday last week, that number was 600.
It was about 1,600 on Thursday.
It was about 2,600 on Friday.
I suspect that the trend will continue this week.
In the oil patch, specifically, where the energy industry is facing a double-whammy from COVID-19 and a price war launched by Saudi Arabia and Russia, hundreds of workers are losing their jobs .
Over the weekend, I asked Ron Ness, president of the North Dakota Petroleum Council, if he knew any specifics about employment impacts in his industry.
"Rob, we have just no way of knowing," he told me.
This trouble in the private sector — particularly in the oil industry, which drives a hugely disproportionate share of tax revenues in our state — spells trouble in the public sector as well.
Not only is North Dakota a state heavily dependent on oil taxes, but we're also a state that leans on the sales tax.
This pie chart, based on numbers from the state Office of Management and Budget , breaks down North Dakota's general fund revenues by source for the entire 2017-2019 biennium, which is our state's last completed budget cycle. I limited this chart to actual taxes, excluding transfers from state funds, like the Legacy Fund, or state-run enterprises like the Bank of North Dakota:
This chart shows those same revenues for the current 2019-2021 biennium, through February :
As you can see, roughly half of all of North Dakota's general fund tax revenues come from the sales tax.
Keep in mind that the bulk of oil tax revenues, by far the largest single source of North Dakota's tax revenues, does not go into the state's general fund. Most of those revenues go into special funds, like the Legacy Fund, which are restricted in how they can be used. That doesn't mean those revenues are unavailable for use, just that they aren't in the general fund, which is essentially the state's checking account.
The Treasurer's Office has some (very complicated) flow charts illustrating how oil and tax revenues are distributed if you're interested.
Anyway, back to the general fund.
Where do sales tax revenues come from? Per the Tax Commissioner's office , it's levied on "the gross receipts from retail sales of tangible personal property, communication services, magazines and other periodicals sold over the counter, cigarettes and tobacco products, and admission tickets for recreation activities; from the leasing or renting of hotel, motel, or tourist court accommodations, including bed and breakfast facilities for periods of less than 30 consecutive days; and from the leasing of tangible personal property."
In other words, the revenues come from a lot of the sort of commerce North Dakotans aren't engaging in right now.
Yes, the grocery stores are busy, but most of the products those stores sell are exempt from the sales tax (though prepared food, such as takeout, is taxed).
Now think about income taxes. Another roughly 25% of the general fund pie comes from corporate and personal income taxes. With businesses closed, with people losing their jobs, that revenue is going to fall too.
This, in turn, will also impact sales tax revenues, because unemployed people and struggling business owners don't shop as much.
Pushing the brakes on North Dakota's commerce is going to hit sales tax collections hard, and with those revenues making up about half of the state's general fund revenues, that's going to mean dire things for the budget.
State officials need to act.
North Dakota operates on a two-year budget cycle. The state constitution requires that the Legislature meets for no more than 80 days during that two years beginning in January of odd-numbered years. The budget cycle they legislate for begins on July 1 of odd-numbered years and runs through June 30 of the next odd-numbered year.
Last year lawmakers used up 76 of their 80 days during their regular session. They can call themselves back into session to use those remaining four days, but they needn't do that. Burgum has the authority to call the Legislature to Bismarck for a special session for which there are no time constraints.
It's time for him to do that, and the sooner he and legislative leaders get that ball rolling, the better, especially since lawmakers will need to figure out a way to carry out their duties while also complying with the necessities of social distancing.
The state needs to act. New budget realities must be addressed. The impacts of this economic pause on workers and business owners need to be mitigated.
We all have a lot of ideas on what should be done (I'd like to see the Legacy Fund backstop a low-interest loan program for North Dakotans), but that debate is just a lot of hot air until the legislators are in place to legislate.
Burgum is a good leader, and North Dakota is lucky to have someone like him at the helm at a time like this, but he can only do so much with executive orders.
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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 .