North Dakota’s taxable sales report for 2015’s second quarter is out and, not surprisingly, the numbers are down.
I say not surprisingly because just a couple of weeks ago the state got a revenue report showing sales tax revenues coming in nearly 4 percent – or more than $52 million – under projections. Also, we all know what’s happening with oil prices and drilling activity right now. We also know that a lot of the workers who came to North Dakota to work in the oil fields are leaving.
That decline in industrial activity, that decline in the state’s working population, is having an impact on commerce. But not necessarily as dramatic an impact as you might expect. While taxable sales numbers were at a four year low in the second quarter, they’re still up about 70 percent from pre-oil boom levels as this chart from the Tax Commissioner’s office shows:
What taxpayers and policymakers need to be worried about is how the state is going to support its bloated on-going spending budget with declining revenues. As this chart created by Legislative Council shows, North Dakota has seen a 115 percent increase in on-going spending since the 2007-2009 biennium:
How long can the state maintain that spending – which, as you’ll note, doesn’t include one-time spending – with falling revenues?
Here’s another looming headache: For multiple bienniums now lawmakers, at the behest of Governor Jack Dalrymple and Governor John Hoeven before him, have been appropriating dollars to local entities levying the property tax in order to buy down property tax levels. This has resulted in some lower property tax bills, but what happens now that the spending shifted into the state budget can’t be hidden in massive oil-driven revenue surpluses any more?
I’m not sure anyone is going to like the answer to that question.