Are North Dakota's Booming Tax Revenue Days Over?
The answer to the question asked in the headline is “not really.” The current biennium’s revenue growth through May was much more moderate than the last biennium’s growth, but c’mon. The state is still seeing 18 percent growth in tax revenues.
I’m sure just about every state in the nation would take that sort of growth.
Through May of this year, North Dakota has collected over $2.7 billion in general fund revenues, $419.9 million more than the 2011-2013 biennium so far. That represents a 18.4 percent increase.
That’s a strong increase, but at this point in the last biennium revenues had grown nearly 62 percent. The pace of revenue growth seems to be slowing, but over the last several bienniums the increases in tax collections have been explosive increasing more than 117 percent over this same point in the 2007-2009 biennium.
Here’s a chart showing the last several bienniums of growth. As you can see, last biennium’s revenue growth was just incredible, which makes this biennium’s 18 percent increase in revenues all the more incredible as it’s coming on top of last biennium’s incredible growth.
This state has a lot of money. Too much money, some might say.
Sales tax collections make up the bulk of increase in general fund revenues increasing $150 million so far over the previous biennium, a 15.8 percent increase.
Personal income tax collections make up the second largest area of increase despite significant cuts in rates passed by the Legislature in 2013. So far personal income tax collections are up $84.7 million or 21 percent. Corporate income tax collections are up $33.4 million or 21 percent.
Current biennium revenues also continue to exceed the legislative forecast used for budgeting and spending purposes, though the margin of error has also been more moderate. So far in the current biennium revenues have exceeded the state’s forecast by 8.1 percent, or more than $202 million. At this point in the 2011-2013 biennium state revenues had exceeded the legislative forecast by more than 40 percent, or $651 million.
The gap between the revenue forecast and actual revenues has drawn criticism from some. Earlier this year former state lawmaker Thomas Fibiger, a Democrat, warned that inaccurate forecasts hurt the budgeting process.
“When you continue to be off that much, and that often, something is wrong,” he wrote in a letter to the Fargo Forum. “And to simply be grateful for having more money coming in than expected without critically examining why there’s such a disparity in projections is not the right tune to be singing.”
OMB Director Pam Sharp defended the forecast which was off by more than $1 billion overall in the 2011-2013 biennium, saying the state’s revenue growth has been “unprecedented,” but Fiebiger was unconvinced.
“When [Sharp] talks of unprecedented growth after experiencing years of such continued growth, when does it ever become precedented?” he told me for a Watchdog article.
It seems as though that revenue growth is now becoming precedented.
Here’s the full revenue report through May of 2014.