Speaking with the editorial board of the Williston Herald, Governor Jack Dalrymple continued to try and tamp down concerns over oil prices after announcing an aggressive spending budget that makes a big bet on oil prices staying high.
“We don’t run the state on oil revenue,” the governor told the Herald. “The Bakken is so productive that the four major oil producing counties have the lowest cost of production per barrel in North America, third lowest in the world. In a situation where people start shutting down drilling, we will be among the very last.”
Dalrymple could be right in his optimism. Perhaps Bakken oil production is much more resilient to falling oil prices than some more pessimistic observers claim. But claiming that the state doesn’t run on oil revenue?
That rings false.
In calendar year 2013, according to the State Tax Commissioner’s office, more than half of all the tax revenues collected by the state were oil and gas revenues. That’s not counting indirect revenues from energy development activity in the form of more sales tax dollars, income tax dollars, etc.
Looking at the income tax alone, revenues biennium to date are up 18.9 percent over the previous biennium despite the personal income tax rate being nearly cut in half since 2009. That’s because the number of workers in the state earning income has increased 31 percent since 2006, while income has increased a whopping 65 percent.
That rapid growth in more income earners pulling down more income is almost entirely attributable to the driving economic force of energy development.
By the end of the current 2013-2015 biennium, the state is expected to have taken in just over $5 billion in revenues directly from oil and gas tax revenues (not counting revenues to tribal lands). That’s up a whopping 526 percent since the 2007, and while a hefty chunk of it is tucked away into the Legacy Fund (among other special funds), it’s still a huge chunk of the state’s roughly $13 billion total budget for the current biennium. A budget Dalrymple would take over $15 billion according to his pitch to lawmakers last week.
Meanwhile, that explosion in revenues has resulted in an explosion in state spending as well, both out of the general fund and out of special funds:
Dalrymple says that we don’t run the state on oil tax revenues. But when oil tax revenues (both direct and indirect) represent more than half of the state’s total revenues, it’s kind of clear that we do.