North Dakota Republicans Blew It on Spending

TOM STROMME/Bismarck Tribune

Members of the North Dakota house and senate listen as Governor Jack Dalrymple delivers his last budget address.

My colleague Mike McFeely writes today that North Dakota’s budget situation is the result of “fiscal mismanagement on the part of ND Republicans.”

He’s right, and the budget for the state’s universities proves the point.

A group of “distinguished professors” from NDSU are decrying what they describe as “devastating” budget cuts. But I’m not sure we should look at what’s happening as cuts so much as the pop of a spending bubble.

From the 2007-2009 biennium to present, general fund appropriations to North Dakota’s universities grew by an average of 16.8 percent per two-year budget cycle.

The universities took a budget cut in the current biennium, from from 2007-2009 through the peak of the state’s oil boom in the 2013-2015 budget cycle general fund appropriations to higher education went up almost 93 percent, including a more than 38 percent increase in the 2013-2015 cycle alone.

That’s all per this graph created by Legislative Council, and as you can see all that spending growth happened despite relatively static enrollment:

The graph shows an executive budget appropriation for the 2017-2019 biennium, but that’s old news. The latest number lawmakers have proposed for the universities is about $610 million in general fund dollars, though obviously that’s subject to change over the next week or so as the legislative session wraps up.

But the point is that spending grew not because there was a need – again, look at that enrollment line – but because the state had the money.

There are a lot of partisan talking points circulating about why the state’s in this situation. Democrats, for instance, would have us believe that Republican-backed income tax cuts and oil tax reform is to blame.

That’s a little hard to believe. The income tax cuts were relatively modest, and the oil tax reform have actually increased the amount of revenue collected since it was instituted in January 2016.

There’s a simpler explanation, which is that Republicans built huge spending increases as though the tidal wave of revenues from the state’s oil boom was going to last forever.

And they spent the money mostly because they had the money.

Which is exactly what this graph, also created by Legislative Management, shows in detail:

Even accounting for the cuts in the current biennium, the average biennial increase in general fund spending was over 25 percent from 2007-2009 to present.

That rate of spending increase was a mistake. Because, again, it was built on booming revenues from oil field activity and high crop prices which were never going to be the new normal.

Republicans defend themselves by arguing that Democrats would have spent even more. That’s probably true. I don’t remember hearing Democrats complain about the rate of spending increases during the oil boom years, but I do remember them saying very often that Republicans weren’t spending enough in certain areas.

Republicans also point out that Democrats would probably try and solve the current budget mess by hiking taxes. Again, that’s probably true.

But none of that changes the fact that Republicans are responsible for the spending which got the state into this mess.

What North Dakota is going through is a budget correction. One necessitated by spending growth built on top of a revenue situation which, again, was never going to be the new normal.

Republican leadership, without a lot of help from Democrats, are making prudent budget cuts in the current session. But they can’t escape responsibility for excessive spending in previous sessions.