While the Republican candidates for governor were engaged in an Obamacare-themed slap fight over the weekend, the Democratic candidate was making a salient point about the state budget.
State Rep. Marvin Nelson of Rolla, who is running unchallenged for his party’s nomination, told Jim Olson of KXNews that despite the promises coming from some candidates North Dakota may be poised for some big tax hikes (emphasis mine):
We – this is shaping up to be one of the largest property tax increases that people are ever going to be able to remember in history. Everyone is taking pledges saying we won’t raise any taxes and we won’t do this. But really what that just means is that they’re just going to shove it all back down on the local level. And you hear a lot about where government has increased. Well, a lot of that was the school funding where the state was picking up a larger amount. And certainly there’s going to be a shrinkage with the oil patch and road construction and stuff.
It’s worth keeping in mind that Nelson isn’t making a philosophical point here. He’s talking about basic math. If the state subtracts from its spending on assistance to political subdivisions, those local governments made add by raising taxes.
Prior to the NDGOP state convention earlier this month, Republican candidate Doug Burgum signed a pledge not to raise state taxes or fees. Stenehjem did not sign that pledge, but has gone on the record saying that state tax hikes are off the table.
But to Nelson’s point, what if the state raises taxes by proxy by shrugging off some of the local spending obligations they accumulated during the high-revenue oil boom years? Technically that wouldn’t be a state tax hike. It would be the locals raising taxes. But that point would probably be lost on citizens seeing more money coming out of their pockets.
Remember that the Legislature under Governors Jack Dalrymlpe and John Hoeven has been trying to address complaints about local property taxes with state spending. Property taxes are a sticky problem, and “solving” them by hiding local spending in statewide budget surpluses was an easy political decision.
But this has resulted in a massive increase in the amount of state dollars flowing to the locals, as you can see from this chart created by Legislative Council:
Part of this is outside of the Legislature’s control. There has been a lot of revenue flowing to the locals from state oil tax revenues. With oil prices in the tank, those revenues are going to be significantly smaller. The chart above was created in January and so the 2015-2017 column doesn’t reflect the state’s downgraded revenue forecasts
The state has also accumulated a lot of local spending into the state budget. The state-paid property tax relief credits, for instance, not to mention an increased commitment to school funding.
The state does have reserves in place to back stop school spending, but how willing are lawmakers going to be to drain that fund with uncertainty about what the oil markets might do going forward?
Nelson is absolutely right. It’s one thing for candidates to statewide office to make promises not to raise taxes, but how about locals once the state starts cutting spending that was flowing into their budgets?
Here’s the full video of Nelson’s interview: