Normally I only appear on Chris Berg’s television show once a week, but since we had some breaking news yesterday regarding the impact of falling oil prices on the state’s budget, he asked me to come on again this week alongside Michael Filloon from ShaleTrader.com.
Headlines are touting what is described as a $4 billion decline in revenues, though as I pointed out yesterday (and this morning at FoxNews.com) it’s more like a $5.5 billion decline. And the decline isn’t from what the state has collected previously but rather from what the state had previously projected that it would collect over the next two and a half years.
In the 2015-2017 biennium the projection released by lawmakers yesterday sees a $4 billion decline in what was previously projected from oil tax revenues. That number goes up to $5.5 billion when we include declines in revenue for the rest of the year for all taxes.
So what does this mean for the state?
The sky really isn’t falling. The major hammer blow – that $4+ billion in declining oil tax revenues – is revenue that flows into special funds. While Governor Jack Dalrymple has budgeted more than $4.8 billion in special fund spending for the next biennium, a lot of that is one-time spending. Things the Legislature has some wiggle room on. Those aren’t revenues supporting things like cops and schools, etc. Plus, the special funds are already carrying balances, and there is still expected to be over $4 billion in revenues flowing into them.
There is still plenty of capacity to spend out of those funds. Indeed, yesterday the state Senate passed a $1.1 billion “surge” funding bill for western North Dakota infrastructure after these projections were released.