A Minnesota friend sent me an e-mail last week, inquiring about what’s going on in North Dakota. She wanted to better understand how we could be so flush one year, and almost broke the next.
It occurred to me there are probably many North Dakotans asking the same question. This is my explanation without politics in my intent.
The Bakken oil boom left the state awash with money, particularly because it coincided with a period in which the farm economy was flourishing.
What should we do with all that money? The legislature focused on these priorities:
- Putting a significant amount into savings and rainy day accounts. The granddaddy of them all was the voter approved Legacy Fund which received 30% of the extraction tax.
- Paying off all of its bond debt.
- Doing a lot of catch-up on building maintenance and other non-recurring spending, like roads.
- Lowering taxes and giving local governments rebates so they could lower property taxes.
- And of course, growing education budgets, somewhat excessively perhaps. North Dakotans love education.
Oil prices went south, as have farm commodity prices, and revenue has dropped precipitously. It’s interesting in the little understood world of economics why all commodities, including oil and food, so often move together
Because North Dakotans are pretty fiscally conservative, the legislature has been reluctant to keep up spending as usual, draining all of our accumulated savings.
Future revenue projections are generally somewhat below our thirst for spending. In the short term they are tapping some of those savings accounts, and appropriating the earnings of our giant Legacy Fund savings account, but not the principle.
The legislative majority, however, feels that it is not smart to live too strongly in an environment of long term dependency on those savings, without bringing state spending down to a more sustainable level.
[mks_pullquote align=”right” width=”300″ size=”24″ bg_color=”#ffffff” txt_color=”#000000″]North Dakota’s University System services student numbers among the highest proportion of the country in population/student ratio. This is partly because we have such a huge number of subsidized non-resident students.[/mks_pullquote]
So the emerging budget, although it will use some of the savings, requires some austerity.
Most of the hurt seems to be in our colleges which over the past few years have been given generous amounts of new money, and now are expected to retrench.
North Dakota’s University System services student numbers among the highest proportion of the country in population/student ratio. This is partly because we have such a huge number of subsidized non-resident students.
It may also be partly due to the fact that we have only two significant private universities which don’t require public funds.
Meanwhile, the state is doing amazingly well, not because of our economy today, but because of these cream cans we filled when we had excess money, so the legislature is reluctant to resort to higher taxes.
It’s the same dilemma we face when a job loss or some very costly event makes us choose whether to use the money we have put away for retirement or give up something else.
Good on Heidi
Living outside of our political system gives me the freedom to be more independent.
I mentioned a couple weeks ago that I see good things to admire about our Sen. Heidi Heitkamp.
She further enhanced that perception this week when she said she was breaking from the Democrats to vote yes on the confirmation of Neil Gorsuch, Trump’s Supreme Court nominee.
“He has a record as a balanced, meticulous and well-respected jurist who understands the rule of law”, she said.
There are cynics who might say she had to do it to save her own skin when she runs for re-election in a red state. And the far left wags are already calling for her hide, so she has critics on both sides.
Nevertheless, she did the right thing and demonstrated courage in rising above her ideological friends, and she deserves the benefit of a doubt.
It makes me feel a bit proud to see North Dakota leading the way with civility in our poisoned Washington atmosphere.