North Dakota legislators received two revenue forecasts this week and while they differ, both offer optimistic news. Legislators will use the numbers today when they are expected to adopt a revenue forecast to guide budgeting decisions during the rest of the session.
Expect legislators to take a cautious approach.
The forecast released on Monday by the Office of Management and Budget expects oil revenues to exceed $4.9 billion in 2019-21, with oil prices of $49.50 per barrel for fiscal year 2020 and $49 per barrel for fiscal year 2021. That’s higher than the $42.50 per barrel figure adopted by legislators in January. Oil production is predicted to slowly increase to 1.44 million barrels per day in fiscal year 2021. Monday’s report predicted an extra $160 million in general fund revenues compared to legislative estimates in January.
Tuesday’s report from IHS Markit, a firm retained by legislators, predicts higher oil prices. IHS estimates oil prices will drop from $61 to $58 per barrel in the next biennium and that oil production will drop from 1.4 million barrels to 1.3 million barrels per day. IHS also predicts general fund revenues through sales, income and motor vehicle taxes will be 7.5 percent lower than Monday's forecast. Republicans pushed to hire IHS because they had become skeptical of the executive branch forecasts.
OMB has used Moody's Analytics for many years for its revenue forecasts. Some legislators have soured on Moody’s after they were off the mark during the oil downturn. Now the legislators have two reports to consider.
House Appropriations chair Rep. Jeff Delzer, R-Underwood, predicted last week that the appropriations committees would likely adopt "something in between" the two forecasts. "We'll look at both of them and then adopt whatever we think is the proper way to go," Delzer told Tribune reporter Jack Dura.
Senate Appropriations chair Sen. Ray Holmberg, R-Grand Forks, said the Legislative Council will assemble a "matrix" of the two forecasts highlighting differences and other data. A lot is riding on what the committees decide today.
The revenue forecast adopted will help decide how much state employees get in raises; funding for K-12 education and higher education; and how the Legacy Fund will be used. Gov. Doug Burgum is counting on the forecasts swaying the Legislature into funding the Theodore Roosevelt Presidential Library and Museum at Medora. Burgum has argued the library offers a golden opportunity for the state to boost tourism.
The governor calls Monday’s forecast "reliable, reasonable and conservative." Republican legislators might not be as confident. After making cuts in state government during the last session they are going to be cautious.
The agricultural sector and the oil industry, mainstays of our economy, can be uncertain.
Still, the Tribune Editorial Board believes even with a conservative approach, the Legislature should be able to afford the major proposals before them. The next few weeks will be challenging, but the final result shouldn’t be even close to the dire budget two years ago.