Lawmakers returning from their weekend break following crossover have a tall task in the second half of the 2013 legislative session: reconciling a nearly $850 million general fund gap in spending based off bills passed so far.
According to the weekly Legislative Council budget update released on Thursday, lawmakers have an $844 million gap to address.
House Majority Leader Al Carlson, R-Fargo, said the lion’s share of the gap comes from duplicative tax and infrastructure bills passed by both chambers.
“We’re usually upside down at the halfway point,” Carlson said. “It’s not really as far off as you’d think.”
In the first half of the session, lawmakers passed a property tax relief package totaling $766 million as well as a corporate and personal income tax cut of approximately $251 million.
House Bill 1358, a bill that would allocate more oil tax revenue to oil patch communities, also will have a significant affect on state revenue, Carlson said. The fiscal note on HB1358 estimates a $454.9 million shift in revenue from the state to cities, counties and school districts.
Carlson said the best parts of each chamber’s tax packages will be brought together and finalized in a conference committee.
“My focus from here on is to make sure the books balance,” Carlson said.
Senate Majority Leader Rich Wardner, R-Dickinson, said the biggest challenge along with balancing the budget is minimizing the amount of ongoing spending.
“When we talk about money, just because we have the money doesn’t mean we have to spend it,” Wardner said. “You have to be really careful with the ongoing spending.”
Wardner said there is an enormous level of one-time spending items being considered, primarily for statewide roads, infrastructure and water projects.
He said with the growth across the state, particularly in the West, the one-time investments are necessary. Already signed into law is Senate Bill 2176, which provides $720 million for the early bidding of highway projects statewide.
“With the ongoing, we’re staying pretty close to the governor’s recommendations,” Wardner said. “Overall, I think it’s going pretty well.”
Allen Knudson, a budget analyst for the North Dakota Legislative Council, said the office’s weekly budget updates help inform lawmakers and the public on the impacts of the Legislature’s actions.
“They have to have a positive general fund balance … by the end,” Knudson said. He added that the $844 million gap was “the most upside-down they’ve been” at crossover.
Legislative Council numbers dating back to the 1989 session show lawmakers have had a positive projected general fund balance at crossover a total of five times in that span — as high as $46.5 million (1991) and as low as $993,000 (1995).
The $844 million crossover gap is more than twice as large as the next-highest projected deficit of $369.8 million in 2007. Prior to this session, the gap lawmakers needed to close had been decreasing since 2007.
In 2009, the crossover gap was slightly more than $281 million; in 2011, it was $105.7 million.
Knudson said with the increased revenue coming into the state and the formulas for property tax buydowns and oil tax allocations, the ability to project the budget has become more intricate.
“Our system works pretty well,” Knudson said. “The complexity with how the bills interrelate with each other has grown.”
Senate Minority Leader Mac Schneider, D-Grand Forks, said not only are budget and infrastructure needs a priority, but the state’s long-term stability must be addressed.
“It’s one thing to balance the budget for the next two years,” Schneider said. “It’s another thing to balance the budget for the next 20 years.”
Schneider said his caucus is concerned about the proposed income tax cuts as well as the oil extraction tax cuts in Senate Bill 2336. The bill would reduce the oil extraction tax by 2 percent as well as deal with stripper well exemptions and a series of oil tax triggers that take effect in the event of a sharp decrease in oil prices.
Budget officials project a positive impact of $35.2 million for SB2336 during the 2013-15 biennium. Democrats have labeled it a large-scale handout to the oil industry. Using a Legislative Council fiscal note, they claim a potential loss of around $595 million in revenue in the first five years after the oil extraction tax rate is lowered.
Schneider said the focus on property taxes seemed to have been lost during the first half of the session and it has been shifted over to income taxes and oil taxes.
“Every dollar passed in corporate income and personal income taxes is another dollar we can’t spend on property tax relief,” Schneider said.
Jeff Zent, a spokesman for Gov. Jack Dalrymple, said the governor is pleased with the progress by the Legislature.
“There’s a lot of work ahead,” Zent said. “There’s a lot of challenges and priorities that need to be met. The governor’s confident they’ll produce legislation and funding that’s sustainable. At the end of the day, you take care of the priorities.”