Governor Jack Dalrymple addressed a joint session of the North Dakota legislature today, proposing an annual spending increase of 9.4% per year for the next two years. Nearly half of this increase, according to Dalrymple, is due to cost of continuing programs today.
The governor projects leaving a $69 million ending general fund balance. One thing to be wary of is the governor’s propensity for using budget gimmicks to make the size of spending growth look smaller. Last biennium the governor, in his executive budget, routed a significant amount of money around the general fund. I suspect that a good deal of the governor’s spending in this biennium is happening the same way.
Here are some of the highlights from his address:
One of the most interesting areas of Dalrymple’s address had to do with taxes. Obviously, property taxes remain a hot issue in the state, and Dalrymple is proposing lowering local tax burdens by increasing state spending burdens for education. The governor is ending the property tax buy-down program initiated under Governor John Hoeven and replacing it with a permanent increase in the state’s share of education funding.
The governor is describing this as $770 million in property tax savings, $372 million of which is the result of shifting school costs to the state (see education section below). That local property tax payers are also state tax payers is a fact apparently not relevant to Dalrymple’s proposal. Not to mention the fact that this is hardly the “Keep it Local” argument Dalrymple and others made in opposition to a measure eliminating the property tax earlier this year.
Dalrymple is also calling for a 40% decrease in individual income tax rates, an extension for the homestead tax credit saving taxpayers additional $20 million for the biennium as well as a paltry $25 million in corporate income tax relief.
Dalrymple proposed $2.5 billion in infrastructure improvements, including $142 million in “one-time funding” for oil counties and townships for roads damaged by traffic. Funds will be distributed based on recommendations from Upper Great Plains Institute and the state DOT.
Dalrymple also wants another $214 million for an impact fund for oil development communities. He also wants a change in the way oil tax revenues are divvied up between state and local governments. He’s proposing the amount of funds available to political subdivisions from oil and gas revenues to be more than doubled, from $247 million to $521 million. Oil and gas counties get first $500 million in revenues, and 25% beyond that with no further caps or restrictions.
He’s also calling for $1 billion in “one-time investments” over and above regular DOT funding for highway construction and maintenance, including $300 million to convert 2-lane highways into 4-lane highways starting with Highway 85 in western ND. That also includes $325 million for truck bypasses and exchanges.
“We are committed to keeping up with the challenges of our rapid growth,” said the Gov.
The Governor said his K-12 education plan “ends excessive dependence on local property tax.” As noted in the tax section, Dalrymple wants to end the property tax levy buy down (which has done almost nothing to slow the growth in property tax rates). “This will eliminate the side effect of an automatic increase in state aid based on rising property taxes,” said the governor saying also that the plan “is sustainable far into the future.”
He wants a $549 increase in spending on K-12, $372 million of which is for local property tax relief. How it’s tax relief when were shifting that funding from local tax revenues to state tax revenues is beyond me.
Dalrymple was a little bit critical of higher education in his address. It was far milder than was warranted, but surprising given how unwilling state leaders are to ever criticize the university system. “Higher education has suffered in the last two years from a series of unfortunate distractions.” He’s, of course, talking about the passive diploma fraud at Dickinson State University perpetrated by university officials there (for which not a single person has been charged criminally to date). I guess that’s an “unfortunate distraction.” It was also a crime committed by state employees, but I digress.
The governor wants a new model for distributing funds, sending a fixed amount to universities based on credit hours per student.
The governor is also proposing a big increase in higher ed’s budget. “We are recommending an increase in $89 million for higher ed, including $21 million to transition to new funding model,” he said. That’s $5 million more than the university system is asking for.
The governor is also recommending “historic investments” in capitol improvements at our universities. He wants $68 million for the new UND medical school building (rather than funding the whole $124 million requested), $6 million to expand a tech center at Lake Region College, $12 million for complete renovation for UND law school and $29 million for NDSU academic building dedicated to science, technology, engineering and math.
The governor also wants $30 million in funding for a matching donation program he’s calling Education Challenge. This would match private donations made to ND institutions.
Here Dalrymple touted the initiatives thought up by his 2020 & Beyond project, headed by the North Dakota Chamber of Commerce. They’re recommending a $5 million grant program to assist in development of new and expanding childcare facilities statewide.
Most surprising here is the $12 million in funding for matching grants for Research ND that the governor requested. What is Research ND? It’s replacing the controversial (and largely ineffective) Centers of Excellence program. Unlike the Centers of excellence, these funds will be matched only with private sector cash investments.
The governor wants $3.8 million for 15 additional highway patrol troopers, $6.6 million to complete first phase of new law enforcement academy, $4 million for new positions in Oil and Gas division (inspectors to enforce oil regulations) and an unspecified amount of funding for new officials within the Department of Health for enforcing environmental regulations
“In all, our funding provides for 171 new positions, 153 for public safety and public health positions,” said Dalrymple. “These positions are necessary for the public safety, and the proper regulatory oversight of our growing economy.”
State will receive $93 million less for Medicaid reimbursements from the federal government according to Dalrymple. Result of ND’s continued growth in per-capita income. We must make up the loss from state resources, according to Dalrymple
State employees would get a 3% per year increase under Dalrymple’s budget after meeting performance standards. Employees who are furthest from market levels of pay qualified for an additional 1 – 5% increase. Dalrymple also wants a 2% increase in contributions to pensions (which have projected unfuned obligations totalling in the billions) as well as a 4% increase in higher education pay, between contributions to pension fund and pay.
This was a surprise. Governor Dalrymple wants a permanent conservation fund to “enhance opportunities for hunting and outdoor activities.” This is something akin to what that ballot initiative derailed by signature fraud perpetrated by NDSU football players would have created. That was an awful proposal that would have enshrined a fund for environmental activism in the state government.
What Dalrympe is proposing is marginally better, but still not a great idea. The fund would get its revenues from oil and gas taxes, just like the measure, but with an annual funding cap of $10 million. An advisory committee made up of “stakeholders” would administer a grant program allowing money to flow to state agencies and non-profit groups (which can include serious political players like the Sierra Club), but under the oversight of the State Industrial Commission, which makes it less likely (though still possible) that these funds would go to controversial groups.
“Our quality of life in North Dakota should not be compromised because of our rapid growth,” says Dalrymple. He’s right, but it seems like we could accomplish that without resorting to taxpayer funding of political activism.
Below is the Governor’s budget presentation, as provided by his office.