Has North Dakota Stopped the Bleeding on Tax Revenues?


“The Pioneer Family” stands in front of the North Dakota State Capitol on July 14, 2016, in Bismarck. Michael Vosburg / Forum Photo Editor

When the most recent oil and gas activity report came out from the Department of Mineral Resources earlier this month I noted that, while overall oil production had fallen below 1 million barrels per day for the first time in 28 months, drilling activity has actually been increasing by small amounts in recent months.


Why is that significant? Because drilling activity is a bigger driver of tax revenues for the state, overall, than actual oil production. Each rig drives a lot of dollars in revenue, particularly in the area of the sales tax.

So I don’t think it’s a coincidence that, as drilling activity in the state has stabilized, so too have general fund revenues according to the latest report from the Office of Management and Budget (see below). After more than a year of the state revising one revenue forecast after another, trying to find rock bottom for falling revenues, it appears as though the most recent revenue forecast issued back in July may have finally got it right. Biennium to date, revenues are just 0.2 percent – or just over $6 million – off that latest forecast.

But for an overall picture of just how much revenue the state lost, take a look at this biennium-over-biennium comparison. It shows a 16.6 percent – or more than $578 million – drop in general fund revenues. Though, of course, that number is skewed a bit by fund transfers included in the calculations. If we exclude those and just look at actual revenue streams, it’s more like a $895 million – or 28.5 percent – drop (click for a larger view):


It appears, for now at least, that the worst may be over for the state budget. Though lawmakers still have a lot of work to do in the upcoming session in terms of adjusting the state’s spending – which exploded during the oil boom years – to reflect this new normal.

And this all needs some context. If we look at the cumulative revenues for this biennium compared to the previous four we can see that while current revenues are down from the last two bienniums – which encompass the peak of the oil boom years – they are still up significantly from pre-oil boom levels.

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Here’s the full OMB report:

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