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Special legislative session called by governor amidst budget shortfall

Republican Gov. Jack Dalrymple on Wednesday called a special session of the North Dakota Legislature to address shortfalls in the state treasury.


Posted on 7/23/16

By Melissa Anderson

Dalrymple made the announcement at the state Capitol after an updated forecast predicted that tax collections will continue to shrink due to depressed oil and farm commodity prices. The forecast, done by the state’s economic consultancy Moody’s Analytics, predicted the deficit would swell to $310 million if nothing is done by the time the current budget cycle ends on June 30, 2017.

The governor made it clear that North Dakota isn’t in dire financial straits but that budget shortfalls needed to be addressed through a bill that would use contingency funds and specific agency reductions, the latter of which can only be done by the Legislature.

The session, which is expected to cost North Dakota taxpayers about $80,000 daily, is slated to begin Aug. 2 and last three days. That’s the minimum amount of time needed to introduce and approve bills in the North Dakota House and Senate.

The governor mostly has governed during a time of unprecedented growth in North Dakota, the nation’s No. 2 oil producer behind Texas. Crop and oil prices, key contributors to the state’s wealth, have plummeted since the Legislature adjourned in May 2015 and planned its more than $14 billion two-year budget that began July 1, 2015, on overly optimistic revenue projections.

The governor ordered across-the-board cuts in state government in February, as well as a raid on the state’s rainy day fund to make up for about $1.1 billion in shortfalls for the current budget cycle. Tax collections since then are down an additional $100 million.

North Dakota’s Constitution allows the governor to call a special session on “extraordinary occasions.” The governor’s action brings to 15 the number of times the Legislature has been called into special session since statehood.

The state still has a sizable financial cushion, Dalrymple said, with hundreds of millions of dollars in various cash reserves. That doesn’t include the oil tax-funded “Legacy Fund” which holds more than $3.8 billion and was approved by voters in 2010. It receives 30 percent of the state’s oil tax collections — though none of the money can be spent until 2017.

“No one should get the impression that North Dakota is in a financial crisis,” Dalrymple said, “It is still a very, very strong and promising economy in the state of North Dakota.”

The governor said some of the state’s shortfall could be made up by shifting profits from the Bank of North Dakota, the nation’s only state-owned bank. It set an earnings record for the 12th straight year in 2015, bringing in more than $130 million thanks, in part, to the once-thriving oil industry in western North Dakota. The streak of record profits began in 2004 — $34.2 million — when the state’s oil boom was in its infancy.

Dalrymple has declined two previous pleas by Democrats for a special session so lawmakers could make targeted budget reductions instead of across-the board cuts of state agencies.

He last called a special session in 2011, when lawmakers, over the course of five days, endorsed, among other things, $30 million in public works grants for local governments whose infrastructure was strained by oil development and about $700,000 to hire four new highway patrol officers to monitor increased traffic in the oil patch.

The North Dakota Constitution limits regular sessions of the Legislature to 80 days every two years. However, a special session called by the governor has no similar restriction and may last indefinitely. [Taken from James McPherson (AP)]

At the county level, state budget cuts are already being felt by officials as they begin the process of reviewing budgets.

At the most recent Cavalier County Commission meeting held on Tuesday, July 19, Cavalier County Auditor Lisa Gellner went over the state aide that the county has received thus far.

So far this year the county has received $250,000 less at this time than what they usually receive. In total, Gellner believes that the county will receive almost $500,000 less in state aide that was received in years prior.

“Budgets are currently being worked on and presented to the commission,” Gellner said, “If there are any expenses that can be eliminated, the departments have been asked to do so.”

The county’s general fund has a larger balance as a result of the state forcing the consolidation of assets held by the county into the general fund. This may actually help float the county as a result.

Gellner informed the commission that the current level of funds is similar to the level that the county held in 2012.

“The county is cutting back anywhere possible and covering the expenses with the funds we have on hand,” Gellner said, “Departments have been asked to be conservative and cut back in any way they possibly can in their budgets for 2017.”

County general and road funds are affected. The cuts in general seem to affect almost every department in some way, whether it is actual funding cuts, programs, grants, etc.

The special legislative session called by the Governor has the county commission and Gellner hoping that the state’s representatives are able to stabilize the revenue loss by accessing other funds that the state holds.

“As of now, we are waiting to see what becomes of the special session. We are supposed to get a revised estimate of future funding after it is complete,” Gellner said.

The City of Langdon finds itself in a similar situation as the county. The city has also expected a substantial decrease in funding from the state. Thus far, Langdon City Auditor RoxAnne Hoffarth has seen a decrease of almost 35 percent in state funding.

“Revenue for the highway distribution fund is dependent on fuel sales and the level of gas tax and motor vehicle registration fees,” Hoffarth explained.

The city has been reviewing the budget the last few months. There are three options available to the city for these decreased revenue projections: cutting expenses, using reserves or raising taxes. The city commission will not know the details of making the best choice of action until late August.