Dalrymple Proposes 12.7 Percent Increase In On-Going Spending

Governor Jack Dalrymple delivered his biennial budget address this morning. You can watch the whole thing above (minus about a minute when my stream glitched for some reason), and read the prepared remarks here. Below are some of the highlights.

“The budget plan is ambitious,” Dalrymple said. “We must always be cautious of overexpansion, a moving threat any time revenues are strong.”

Obviously, a big concern many have is what the state’s revenues will look like amid this time of oil price uncertainty. Dalrymple sounded a confident tone. “We expect revenues to remain strong in the next budgeting period,” he said. “We expect revenues to continue to exceed on-going expenditures.”

In terms of general fund spending, the Governor said on-going expenditures will total $5 billion in the next biennium, and one-time spending will represent $2.2 billion for an overall increase in 5.4 percent in general fund appropriations.

That’s a 12.7 percent increase in one-time spending over the current biennium which saw $4.6 billion, but a roughly 9.7 percent decline in one-time spending from $2.4 billion this biennium.

In terms of total spending, Dalrymple is proposing $15.78 billion in spending for the next biennium, a roughly 14.5 percent increase from $13.77 billion in the current biennium. And it’ll probably be more than that. Here’s what happened to general fund spending when the Legislature got a hold of Dalrymple’s budget last session:

Addressing oil price uncertainty, Dalrymple noted that the general fund (from which on-going spending is drawn) is limited to $300 million in oil tax revenues. Rest of oil taxes goes to constitutional funds and statutory funds which are generally used for special funding (or not used at all).

So, basically, Dalrymple is arguing that oil price uncertainty will have little impact on core-spending but may have impact on one-time spending. I’m not sure how much comfort that is. The oil boom has more impact on the state budget than just direct oil/gas taxes. The commerce, hiring, and income growth driven by the oil boom also have major impacts on sales and income tax revenues.

Dalrymple is projecting an ending general fund balance will be $97 million on June 30th 2017.

Here are some specifics

Tax Relief

Dalrymple is recommending that the state assume a larger share of the cost of county social services, alleviating more local tax burden. This is sure to be a controversial proposal as many lawmakers vehemently oppose this idea.

Dalrymple wants the state to cover the county share of child welfare programs in the coming biennium, which he says will amount to a mill levy reduction of $23 million. He also wants the state to study assuming more social services in 2017-2019 biennium.

The governor also wants lawmakers to continue the 12 percent county level buy down of property taxes which will amount to $250 million for the biennium. But he only wants this for one more biennium. “This form of tax relief is appropriate for the time being,” he said, until state can take over cost of local social services.

Dalrymple also called for expanding the Homestead Tax Credit by raising maximum income threshold from $42,000 to $50,000 per year

As for income taxes, Dalrymple (who is reticent about cutting this tax to the chagrin of many of his fellow Republicans in the Legislature) wants only a $100 million in individual income tax relief. The governor points out that this would reduce individual income tax rates by nearly 50 percent from rates paid before 2009 and would put the top income tax rate at lowest in state history, not to mention the lowest in the nation among those with a broad-based income tax.

He’s also proposing a paltry $25 million in corporate income tax relief. I suspect the Legislature is going to want more on both fronts.

Oil Taxes

Dalrymple wants a big changes to the revenue sharing formula for oil taxes. After counties receive $5 million from oil production tax, Dalrymple says they should receive 60 percent which is something Rep. Roscoe Streyle of Minot and Senator Kelly Armstrong of Dickinson have called for here on SAB.

Dalrymple says those changes would generate $1.7 billion in revenues for western communities, or $1 billion more than the current biennium. But Dalrymple doesn’t want that to be the new normal. Projecting that infrastructure needs will crest in current biennium, and that demands for new infrastructure will plateau by 2018. he’s asking the legislature to taper off the larger local share of oil tax revenues beyond then.

Which sounds great to me.

Dalrymple also expressed support for $873 million in so-called “surge” funding to oil cities/counties, which is actually more than western lawmakers have asked for, though Dalrymple’s total includes money for non-oil counties too. Probably a political nicety intended to buy support from eastern lawmakers.

Dalrymlpe also called for continuing the Energy Impact Grant Program with $119 million in coming biennium

Housing/Infrastructure

Dalrymple touted $3 billion in public infrastructure projects.

His budget calls for transferring $100 million in Bank of North Dakota profits to a public infrastructure loan fund which would provide political subdivisions with below-market interest loans.

State has leverage $90 million in loans and tax credits for affordable housing. Increasing from $35 million to $50 million for affordable housing incentive fund. I think that fund is a bit of a joke, and last session lawmakers seemed to share the skepticism cutting down the amount dedicated to it. Honestly, I think it’s more of a sop to developers than it is assistance for housing issues.

Flood Protection/Water Projects

$61 million last biennium forMinot flooding, $110 in new biennium
$69 million for Fargo flooding last biennium, committed to $469 million
$120 million for further development of the WAWS project
$600 million in rural and muncipal water supply projects including $100 million for southwest water project and NAWS
$150 million for Red River Water Supply project
$100 million for Grand Forks Water Treatment Plant

Law Enforcement

$90 million to law enforcement including $27.5 million to complete law enforcement training academy and 4 additional highway patrol troopers in western ND. Will expand Highway Patrol with 25 additional troopers in last 3 years.
$20 million in law enforcement grant funds for western ND
19 additional staff for BCI, including 9 criminal investigators, 3 intelligence analysits, a forensic analyist and a victim advocate.
$8 million for enhanced state radio/emergency response equipment
13 additional parole/probation officers
$30 million to build new minimum security correctional facility, replacing existing Missouri River Corrections Facility

Agencies

Dalrymple wants to relocate the state Supreme Court to the Liberty Memorial Building in Bismarck which would be remodeled and expanded. Court space in the capitol would then be used for other agencies.

19 new positions in Department of Health to provide greater protection against environmental hazards and public health threats
22 new positions within oil and gas division including petroleum engineers and field inspectors
8 positions in PSC to monitor rail safety and pipeline integrity
Give Department of Health access to a state reclamation fund to remediate salt water spill

K-12 Education

This might have been one of the most interesting areas of Dalrymple’s address. He’s basically calling for a voucher program for earl childhood education.

The governor announced support fo a proposal to place funds behind every 4-year old to enter a certified pre-k program be it public or private. There would be $6 million for support grants to community programs to make this happen.

I have to feel that the education folks, who hate the idea of vouchers, hate this idea.

K-12 schools get a 3 percent increase in the state’s share of per-student spending per each year of the biennium, a spending increase of $401 million.

Dalrymple also wants to expand eligibility of the rapid enrollment growth programs. Many school districts (including mine here in Minot) have complained that a quirk in the existing qualifications denies them funding.

The governor is also asking for $300 million for school construction revolving loan program.

Higher Education

Dalrymple called for a tuition freeze at 2 year colleges, more money for scholarships, and security enhancements. He also wants $50 million for student financial assistance programs and an increase in the merit-based scholarship program to $10,000 per student, up from $6,000 currently.

He is also recommending a 4 percent increase in needs-based scholarships for each year of biennium.

7.6 million for tuition buy-down and student loan forgiveness for students who obtain jobs in high-demand fields.
$62 million to complete UND school of medicine
$16 million to rebuild airport apron at UND school of aviation
Other capital projects at Bottineau, Valley City, Wahpeton
$23 million to advance plant and animal research at NDSU, including $800,000 and two positions at NDSU to support bioinformatics research.
$18 million to construct veterinary diagnostics lab at NDSU

Economic Development

$26 million in workforce grants and programs across several state agencies including $6 million for grants for tribal colleges and 1.5 million for workforce enhancement grants for 2-year colleges and 2 million in grants to North Dakota Safety Council to enhance workforce safety
$4.2 million for operating the UAS airspace integration center.
$5 million to support Grand Sky business park at Grand Forks airforce base
$3 million in grants for new or expanded childcare facilities
Additional funding for Train ND program and new workforce recruitment program

Outdoors/Parks/Conservation

$30 million for exiting outdoor heritage fund, new budget recommends increase to $50 million for biennium and formula be revised to ensure targeted funding level is achieved.
$10 million for development of 200 acre day park along Missouri River in south Bismarck from existing state land
Major upgrades to Lake Skajawea State Park in Pick city and other parks, $30 million in new park investments
$80 million in total to enhancing outdoor recreational activities and conservation

Human Services

$6.6 million to expand behavioral health services, fund mobile on-call crisis service to connect clients with mental health serivces. Also expand local treatment of mental health issues and chemical dependency
Expand student loan forgiveness program to attract mental health professionals
$6.2 million to expand enhancement of protective services of vulnerable adults and includes $3 million to expand help for children with autism
4 percent inflationary increase for each year of the biennium to nursing homes, and those serving mental health issues
Full funding for veterans bonus program

State Employees

Overall Dalrymple’s budget includes 247 new state employees and 40 new employees for higher education. That total includes 50 for law enforcement and 87 dedicated to public safety, public health, the judicial system and environmental oversight.

Dalrymple is also calling for $52 million in increases for compensation for state employees including:

3-5 percent pay increases for state/university employees
Increases for employees who exceed performance levels
Increases for employees who are getting below-market pay

Dalrymple claims increased state/employee contributions puts the state’s “defined benefits pension plans on path to complete actuarial soundness.” Of course, state leaders are fond of using wonky math to claim pension health, so I’ll believe it when I see it. Meanwhile, lawmakers are pushing legislation to end inclusion of new hires in the state’s defined benefit plans. Which is what’s needed to stop the bleeding.

Here’s the presentation for the address distributed by the Governor’s office:

Dalrymple Budget Presentation