- Associated Press - Wednesday, January 6, 2016

BISMARCK, N.D. (AP) - North Dakota’s economy is continuing a downward dive due to low crop prices and a sustained oil industry slump, the state Tax Department reported Wednesday.

North Dakota’s taxable sales and purchases - a key indicator of economic activity in the state - were $5.7 billion for July, August and September. That’s nearly 25 percent less than what was collected in the third quarter of 2014 and the lowest for the quarter since 2011.

Tax Commissioner Ryan Rauschenberger said the most of the drop is due to a decline in oil activity that’s a result of lower crude prices, and was expected. Records show that 10 of 15 industries reported decreases during the third quarter of 2015. Mining and oil extraction recorded the biggest year-on-year decrease for the third quarter - 53 percent - dropping from $1.3 billion in 2014 to $651 million in 2015.

Taxable sales and purchases were down $1.1 billion in the second quarter of 2015 compared to the year prior, the first such drop in several years following mostly double-digit growth.

“The third quarter being down is absolutely not a surprise,” Rauschenberger said. The fourth-quarter report, which won’t be published until April, will likely show similar declines, he said.

If the 2015 year-end numbers are as expected, it will mark the first time since 2009 the state will have recorded weaker taxable sales and purchases than the year prior, Rauschenberger said.

“With exponential growth like we’ve had, we were bound to see negative numbers sooner or later,” he said.

The two largest components of state taxable sales and purchases - wholesale trade and retail trade - both dropped sharply in the third quarter. Wholesale trade sank 32.5 percent, to $1.3 billion, while retail trade decreased 6.5 percent, to $1.69 billion.

Rauschenberger said low commodity prices not only negatively affected the agriculture and energy industries, but also wholesale and retail trade.

“The decrease in spending statewide is a direct outcome,” he said.

Williston, in the heart of the oil patch, had been leading North Dakota in taxable sales and purchases since 2011, when it surpassed the state’s biggest city of Fargo. Williston took in $528.9 million in taxable sales and purchases in the third quarter, which trailed the $722.8 million that Fargo collected.

North Dakota’s taxable sales and purchases are key in forecasting budgets, and officials are preparing for the economic fallout. The state’s budget director last month ordered an updated revenue forecast last month and has said agencies “very likely” will have to trim spending due to lower-than-expected tax collections from a decrease in oil drilling in the state.

The state’s last forecast was completed in March, when state lawmakers used its assumptions to finish work on state government’s current two-year budget.

Office of Management and Budget Director Pam Sharp said agencies may be asked to cut budgets, depending on what the fresh revenue forecast shows. It is expected to be released later this month.

Overall tax revenues through November are $152.2 million less than projected for the two-year budget cycle that began on July 1, data show. Most of the drop comes from weakened sales tax revenue, which provides the biggest share of the budget for North Dakota government. And the decline in sales tax revenue is directly related to the decrease in oil rigs, which have dropped by two-thirds over the past year.

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