- Associated Press - Sunday, March 19, 2017

BISMARCK, N.D. (AP) - A rainy day fund that once held hundreds of millions of dollars and was established for when North Dakota’s tax collections fall short will end the month empty for the first time since it was established 30 years ago.

With the so-called budget stabilization fund drained and an ongoing string of woeful revenue forecasts, North Dakota lawmakers are forced to cut back on record spending for the first time in years and are scrambling to balance the books while funding state priorities.

Here’s a look at the task before the Legislature now and how it may be addressed:



In short, record spending and volatile commodities.

The two-year budget for North Dakota state government, including federal aid, was a record $14.2 billion when lawmakers approved it two years ago. Crop and oil prices, key contributors to the state’s wealth, have plummeted since then.

Since then, the general fund share of the budget that runs through June has been slashed from $6 billion to $4.3 billion. The shortfall was made up through a raid on state savings, cutbacks to state agencies and employees, and shifting profits from North Dakota’s moneymaking state-owned bank.



Legislators have about a month left to finish their work, which includes adopting a balanced budget for the next two-year budget cycle. And some budget writers are beginning to sweat.

The reason? The most recent budget estimates are that revenues in the next two-year cycle will fall nearly $672 million short of the proposed $4.3 billion spending plan for the general fund, which is financed mostly by taxes on sales, income and energy.




As dire as the picture may appear, revenue continues to pour in, though not at the gushing rate of the oil frenzy that made the state the nation’s No. 2 oil producer behind Texas. North Dakota’s revenue picture has essentially dropped to the pre-boom status of about five years ago.

One bright spot for budget writers is drill rig activity, which has about doubled in recent months due to a slight uptick in oil prices. Industry and state officials say each active oil rig - there were 47 as of Friday - represents about 40 direct jobs and 80 indirect jobs in the state. That means more revenue for the state on everything from income tax on new workers to sales tax on a heat lamp pizza at a convenience store.



The state still has a sizable financial cushion, with more than $5 billion in cash parked in various reserve accounts.

One that’s now empty is the state’s Budget Stabilization Fund that had held more than $572 million last year before it was tapped to make up shortfalls. Established in 1987, it was intended to stash extra tax money from industry booms to be used in leaner times to protect state programs. The last remaining cash was taken out this month, leaving the fund empty.

North Dakota’s biggest - but restricted - piggy bank at present is the oil tax-funded “Legacy Fund,” which holds more than $3.8 billion that includes a February deposit of $32.3 million. Approved by voters in 2010, it receives 30 percent of the state’s oil tax collections - though none of the money can be spent until this year. A two-thirds vote of the North Dakota House and Senate is needed to spend any of the fund’s principal but lawmakers have yet to publicly express the appetite to do so.

Democrats have long pushed to spend the interest from the fund and once-reluctant Republicans now are in agreement. Some $160 million in interest from the fund is being factored in the budget to balance the books.

The state’s Strategic Investment and Improvements Fund, which is supported with oil and gas taxes, is another source targeted by budget writers. The fund held more than $1 billion but was depleted two years ago to pay a “surge funding” bill that fast-tracked money for highways and communities affected by oil development. The fund is projected to hold about $365 million at the end of the current budget cycle.

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