Guest Post: North Dakota Really Doesn’t Have The Money

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Written By:
Kent Busek

Feb 1, 2012
12:14pm

We in the eastern part of North Dakota along the Red River have limited knowledge of the explosive growth that is going on in western ND.

The one item that we in the east have come to believe is that North Dakota is awash in cash primarily due to oil industry growth. This is the perception given by the media. That the state has money and should spend money on this, that and everything that comes to mind. One joke amongst a group of my colleagues is that the state should annex Moorhead, MN and build the NFL’s Vikings franchise a stadium “because North Dakota has the money.”

I should have known better to believe this as true.

I was fortunate to attend “A fix the tax event” with former Governor Ed Schafer last year in which he expressed concern that state government was growing too fast and when, not if, oil revenues slow down the state would have financial issues. I took that comment to mean that the state would have a couple of years to evolve and downsize because we have a “billion dollar surplus” every year. With the year after year surplus reported by the state, I thought the state must have accumulated $3 billion – $5 billion in savings, and that we have more surpluses coming because oil is still growing.

That is where I was wrong.

How much money does the state have in reserve? I have conducted an informal poll, asking this question of colleagues. I have found many people are like me and have a fundamental misunderstanding as to the cash reserves of the state.

What I have found is the state is spending the surplus at each legislative session. The surpluses are not accumulating. Whatever surplus we have from the last biennium we are spending in the next biennium. As a result, the only savings we have (aside from the new legacy fund which just started collecting funds) is this biennium surplus. So in essence we have an annual surplus, but almost no accumulation of reserve funds.

I was stunned. Listening to politicians, listening to the media, listening to the causes and special interests, the message is “North
Dakota has money, let’s spend it”. The reality is the state has already spent it. I am a believer in the oil patch and the fact that we are early in the oil production. We will have many, many years of increased production and tax revenues. But I also believe that the money should be saved.

I was for property tax cuts and income tax rebates. But based on my new perspective on the the state’s growth in government, the state can’t afford tax relief. Nor can it afford a dramatic decrease in oil production.

Kent Busek is a Fargo-based CPA as well as property developer. He is currently building the Stonebridge Farms development in Minot.