The oil boom in western North Dakota, along with higher than expected sales and income tax collections, are beefing up North Dakota state government’s financial reserves. Expectations are that by June 30, 2013, the state will be sitting on a $2 billion nest egg. It means that that the Legislature that begins meeting in January will have the resources on hand to meet challenges that face the state, certainly in terms of investing in infrastructure, but also in replacing federal funding that’s expected to dry up when Congress faces deficit and debt reduction.
Spending by state government has gone up significantly in the last several sessions. A great share of that spending has gone to infrastructure, education and deferred maintenance of state buildings and facilities. That spending has not come at the expense of any state deficit or debt. The North Dakota Legislature, a conservative body by any estimation, has been reasonable in its spending.
Compared to the situation many states find themselves in, North Dakota is the land of milk and honey or, rather, the land of crude oil and natural gas. Make no mistake, it’s also the land of small grains, beans, corn and livestock.
In addition to last week’s projections of a very healthy state reserve, another news story noted that the state’s capacity to ship crude oil to market by rail had increased 50 percent, as two new crude-to-rail terminals went on line.
The increased expectations for state tax revenues are directly related to improvements in infrastructure like these train-loading facilities. It’s one thing to have the oil production, but if the infrastructure isn’t in place to get it to market, what is it worth in dollars and cents? It’s the same motivation behind the recent development of grain elevators capable of feeding 100-car unit trains to move the state’s harvest to mills for processing and harbors for export.
It’s this infrastructure, whether private in terms of rail or pipeline, or public in terms of roads and bridges, that’s key to the economic model that North Dakota is presently operating under. It will be a big part of what the Legislature must grapple with in January. And these projections of very strong reserves raise citizen expectations for tax relief and a desire to invest in the future of the state.