FARGO — North Dakota’s recovery from the Great Recession soared beyond any other state in an analysis of tax revenue gains over a decade that saw its coffers gush along with oil wells.
The study found that North Dakota’s tax revenues rebounded by 58.7% over a 10-year period ending in the third quarter of 2018, adjusted for inflation. That’s the biggest gain among the 41 states that experienced tax gains over the post-recession period.
The period included the peak of the Bakken boom in North Dakota’s Oil Patch. At one point the state’s tax collections hit a high of 123.9% above their crest during the recession, which lasted from 2007 to 2009, according to the study by the Pew Charitable Trusts.
By comparison, neighboring Minnesota and South Dakota also experienced revenue rebounds over the 10-year period. Minnesota’s state revenues grew 27.2%, while South Dakota’s tax collections rose 21.6%, according to the Pew study.
On average, state tax collections have increased 13.4%, adjusted for inflation, over the study period.
Ryan Rauschenberger, North Dakota's tax commissioner, said the analysis captures the dramatic increase in revenues during the boom, which since has tapered to a more steady pace.
“We were able to buck the national recession,” he said. “That was mostly due to oil. Oil prices remained high during the national recession.”
In fact, because of the high paychecks available for working in the oil fields, North Dakota was able to recruit labor from all over the country during the peak boom years.
“We were able to actually benefit from the national recession,” Rauschenberger said. “There was available workforce.”
In more recent years, a worker shortage due to the low unemployment rate around the country has slowed North Dakota’s economic growth, officials and business leaders have said.
Propelled by oil extraction and production taxes, North Dakota’s state tax collections peaked in 2014 at $6 billion, then dropped steadily to $3.3 billion in 2017 before rebounding last year to $4.1 billion, according to state figures.
“We’re still leaps and bounds ahead of where we were before the recession,” Rauschenberger said.
Revenues from oil activity now account for slightly more than half of the state's tax collections, he said.
Although North Dakota had to adjust to the abrupt drop in revenues when the oil boom faded, revenues since have stabilized and growth is on a healthy trajectory, he said.
“We’re seeing steady, year-over-year growth with reasonable oil prices,” Rauschenberger said. “This is the kind of growth we like to see.”
Although oil prices are “reasonable,” farm commodity prices remain low, continuing a slump in farm income.
Moody’s Analytics, the state’s economic forecasting firm, projects farm income will increase 2.5% per year and North Dakota’s overall revenues will increase 3.5% per year over the next two years.
“So we do expect some growth over the next couple of years, but very conservative growth,” Rauschenberger said.
Not all oil-producing states have fared as well over the decade since the recession, according to the Pew analysis.
Alaska’s revenues fell by 83.7% over the period, adjusted for inflation, meaning the state collected only about 16%, after inflation, during the brief peak in 2008, which coincided with a new state oil tax and record-high oil prices.
Oklahoma was 6% below its peak. Texas, the top oil producing state, experienced a 14.6% gain in tax revenues, adjusted for inflation, over the decade since the recession.
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