North Dakota bumps budget due to faith in oil outlook
BISMARCK, N.D. (AP) — North Dakota’s Legislature on Monday bumped tax collection expectations for the next two-year spending cycle, with budget writers banking on stable oil prices and production.
House and Senate appropriation committees predicted general fund tax collections at $4.04 billion, or $95 million more than the Republican-led Legislature’s budgetary starting point in January.
Senate Appropriations Chairman Ray Holmberg called the Legislature’s numbers “very reasonable.” Lawmakers will rely on them to finish their work on the state’s 2021-2023 spending plan.
“This is the one we hang our hat on,” Holmberg told the appropriations committee. “It’s the best guess we have at this point.”
Lawmakers based their numbers on a pair of competing revenue forecasts presented last week. Lawmakers essentially split the difference between estimates done by state budget analysts and Moody’s Analytics, and their own economic consultancy, IHS Markit.
While oil prices are a key contributor to the state’s wealth, oil revenues actually are a relatively small part of the state’s general fund, which finances state government and a variety of programs.
The general fund can take in no more than $400 million in oil tax revenues per two-year budget cycle, a setup designed to protect the budget from price swings. Beyond that level the money goes to other state funds. The state’s general fund is financed mostly by taxes on sales, income, corporations, tobacco and gambling.
Lawmakers assumed oil prices at $40 a barrel when crafting their budgetary starting point in January, though prices have hovered at around $60 a barrel since then, including on Monday.
The Legislature’s appropriations committees on Monday adopted an estimated price of $60 a barrel, and predicted production would decline from about 1.1 million barrels daily to 1 million barrels in the second year of the budget cycle.
House Appropriations Chairman Jeff Delzer told the committee that state regulators and oil companies “think they can do 1 million barrels with no problem.”
State budget officials estimate that every dollar that a barrel of oil either increases or decreases has a more than $40 million impact on the state treasury annually.
The state’s current two-year budget, including federal aid, is $14.7 billion. The budget represents about $4.9 billion in state general fund spending for the 2019-21 budget cycle that ends June 30.