Will Tax Revenue Remain Strong In North Dakota?

Or are the tax-and-spenders putting lipstick on a pig to justify their profligate ways?

An updated budget forecast presented to lawmakers on Monday showed that North Dakota should expect strong tax revenues over the next two years despite slumping oil prices and signs of a recessionary economy touching the state.
The update, presented by the Office of Management and Budget, comes about two months after Gov. John Hoeven presented his budget to the Legislature. During his December budget outlook, Hoeven estimated that the state’s reserves would end somewhere between $800 million and $1.2 billion, depending on the price of oil. Monday’s report showed that the state’s reserves should be nearly $1 billion in June 2011.
Oil revenues are expected to drop from $829 million to $603 million, a decrease of about 28 percent. Officials from Moody’s Economy.com estimate that the average price of oil over the next two years should be remain above $40 a barrel.
Income and sales tax are both expected to slightly decrease over the next two years, with upticks in the cigarette and tobacco tax income as well as the coal conversion tax revenue.

I have several problems for this.
First, the loss of about $200 million in oil tax revenue is treated as though it’s not a big deal. Which seems a bit absurd. A nearly 1/3 decline in oil tax revenues is a big deal, and our political leaders should be reacting accordingly by limiting spending just in case oil prices don’t remain above the $40/barrel threshold state officials have set as an acceptable minimum to fund current budgeting practices.
But as for that $40/barrel minimum, it’s worth noting that’s a national average. Oil actually from North Dakota, sweet crude to be specific, traded at an average of $21 in the month of January. As of yesterday the price was $18.85. I am not nearly as confident in these high projected oil prices as the people busy spending our tax dollars seem to be. And while they may be right, and oil prices may rally to make everything ok, do we really want to be taking that gamble?
Also, the idea that tax revenues from tobacco use are going to increase seems a bit absurd. In the last election North Dakotans approved a ballot measure creating a permanent anti-smoking bureaucracy with perpetual funding and with a goal of hounding North Dakotans into quitting their tobacco habits. We’re also considering in the legislature a bill to ban smoking in hotels and bars. So even as the state works at a prohibition of tobacco through a thousand regulations, they’re expecting tobacco tax revenues to increase? Also, Obama just signed an expansion of government health care into law that’s to be funded by massive new taxes on tobacco that will undoubtedly dampen tobacco use. So, again, tobacco tax revenues are supposed to increase?
Somebody is either kidding themselves, or trying to put a fast one over on the people.
The simple truth is that this revenue outlook isn’t nearly as cheerful as its being made out to be. We should be proceeding with caution, not acting like we’ve got money to spend.