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Legislators may drop revenue forecast by $170 million

Legislators may drop revenue forecast by $170 million

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House Appropriations Chairman Jeff Delzer, R-Underwood, left, and Rep. David Monson, R-Osnabrock, answer questions at a revenue forecast meeting in Bismarck last week.

Members of the House Appropriations Committee are looking at adopting a revenue forecast that is $170 million less than what former Gov. Jack Dalrymple used before leaving office.

“Most of us are pretty concerned about what number Gov. Dalrymple had for the revenue forecast,” said Appropriations Chairman Jeff Delzer, R-Underwood.

Thursday, members of each chamber's Appropriations Committee will vote on the plan created by Republican legislative leadership. The plan adjusts projected oil prices as well as sales and income tax projections downward for the 2017-19 biennium, but keeps oil production levels flat from the last forecast.

Dalrymple’s December executive forecast estimated about $4.81 billion in general fund revenues for the 2017-19 biennium. The plan by GOP leadership calls for a starting point of $3.68 billion in the budgeting process.

“We’ve got a billion-dollar hole in the North Dakota economy that we really haven’t filled yet,” said Rep. Keith Kempenich, R-Bowman.

The proposed changes to the forecast include reductions in the projected collections of sales and income taxes and a proposed transfer of Bank of North Dakota profits to the general fund.

Leadership projects $1.795 billion in sales tax collections for 2017-19, a reduction of more than $146 million from Dalrymple’s forecast. A reduction of more than $19.6 million in income tax collections, to $693 million, for 2017-19 is also outlined in the updated forecast.

Leadership also slashed a significant portion from the total by eliminating a proposal by Dalrymple to increase the combined amount of oil and gas production tax and oil extraction tax from its current cap of $300 million to $1 billion.

For oil and gas production in 2017-19, leadership calls for a $48 per barrel oil price for North Dakota crude, down from the $51 to $53 per barrel range used in Dalrymple’s proposal. If the legislative plan passes, the projection of bottoming out and holding at 900,000 barrels per day for the next two years would be maintained.

The prices being used are what officials commonly refer to as North Dakota prices. Crude from the state typically sells at a discount of several dollars from the price of West Texas Intermediate, a national benchmark.

“This is the starting point for us for the next two years,” Delzer said.

Following the vote on the more conservative revenue forecast, lawmakers will update the forecast again in March.

House Majority Leader Al Carlson, R-Fargo, said leadership considered Dalrymple's numbers a bit optimistic in terms of oil production, prices and sales tax revenues.

Sales tax revenues have been a significant factor in the state’s nearly $1.4 billion revenue shortfall in 2016, as energy production has dropped and agricultural commodities have slipped.

“Our adjustment is to a realistic number that industry agrees with,” Carlson said.

An increase in oil prices, or a reduction in the price discount on North Dakota crude upon completion of the Dakota Access Pipeline, could occur in 2017-19, according to Carlson, who said it’s better to err on the side of caution and not have to make further cuts during the next interim.

(Reach Nick Smith at 701-250-8255 or 701-223-8482 or at nick.smith@bismarcktribune.com.)

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