John Dorso: Legislative Session Will Hinge On Oil Prices

I haven’t had an opportunity to review the entire Governors budget message just delivered to the organizational session of the 64th legislative session.  Based on a quick overview I would like to make a few comments.   Governors and the Office of Management and Budget have always had a difficult time putting together a budget that the legislature can accept in its totality.  Given the time constraints they must work under it is difficult to project the ending fund balance of the present biennium or be totally confident in the revenue projections they must use to put the package together.

It always bothered me that the governor, staff in his office and those at OMB took offense at legislator’s lack of confidence in their numbers.  They were working off a blue print that was at least four months old while when we looked at it we had the benefit of the latest economic news.   They put out the parameters they expect all of the agencies and departments to use in putting their budget requests together many months before the budget is printed.  After OMB gets the feedback they have to crunch the numbers to put together a reasonable document for the Governor to deliver in the December before the legislative session begins.  With all of that work it is no wonder they have some sense of ownership in what is presented.  While some at OMB were offended that legislators were skeptical I always thought it was helpful to have legislators review and critique the document.  The budget document is the template for the appropriation bills introduced by the agencies.  The legislature is charged by the state’s constitution as the only body that can appropriate the taxpayer’s dollars it would seem appropriate that they review and amend the bills that reflect the governor’s budget.

I and Senator Nelson always favored having a more active role for the legislature in the preparation of the budget.  Although that effort was defeated I for one always felt that if the executive branch wanted buy in on their requests they would have been well served to let legislators in at the front end of the process.  By keeping the document from us until the organizational session they bred skepticism with the assumptions they used as the basis for their computations.

[mks_pullquote align=”right” width=”300″ size=”24″ bg_color=”#000000″ txt_color=”#ffffff”]”This time around reminds of the era of the 80’s where the Republicans in the house had little faith in the numbers OMB presented us.”[/mks_pullquote]

With all the above being said and debated the present budget is no less a matter of conjecture as it always has been.  This time around reminds of the era of the 80’s where the Republicans in the house had little faith in the numbers OMB presented us.  The circumstances are different with all due respect to the present Governor.  Back then Gov. Sinner and his OMB director would put a rosy projection of revenue together with an ambitious plan for more spending.   A Democrat controlled Senate would pass the Governor’s budget bills with some enhancements, over in the House controlled by Republicans, a more cautious note would be sounded.   All of that culminated in 1989 when the taxes enacted to cover the profligate spending were referred and the tax payers defeated 2 of the 3 proposed increases.  Mind you it took a combination of Democrat and Republican votes to pass the taxes in the House that easily passed the Democrat controlled senate.    At this point let me remind the readers it does make a real difference which party is in the majority in both houses.  The point is driven home by my experiences in the 80’s and the recent passage of the Obamacare bill when the Democrats controlled both houses of Congress.  More recently Majority Leader Reid’s style reminds me of when Sen. Bill Heigaard was the North Dakota Senate leader.

At this point I do not know how wedded to his budget the Governor is.  I do know the legislators have the luxury of knowing that revenue from oil and gas is likely to be less than projected at least for a part of the next biennium’s budget cycle.  Because of the size of the contribution that energy taxes have become as a percentage of the total revenue it is a big issue that cannot be ignored.  The double whammy of falling prices and their effect on total production causes computing the loss of revenue to be more guess work than an educated projection.  At this time most conservatives would suggest caution in any increases in spending.  A certain amount of increase is all ready built into the budget no matter what happens.  Cost of health care for state employees, raises granted in the second half of this biennium, additional employees taken on plus other additional costs built into the present budget.

I would also like to remind you that if energy exploration slows down there will be costs associated with the slow down.  As people are laid off in the oil fields they just don’t disappear and come to life in another jurisdiction.  If they can’t find jobs because the energy sector is in a slump nationally they will stay in North Dakota and access all kinds of county and state programs until they can find employment here or in another state.

[mks_pullquote align=”left” width=”300″ size=”24″ bg_color=”#000000″ txt_color=”#ffffff”]”Because of the size of the contribution that energy taxes have become as a percentage of the total revenue it is a big issue that cannot be ignored.”[/mks_pullquote]

I would hope that everyone stays calm and doesn’t make any radical statements or moves until after the legislative crossover. Soon after the legislators return to Bismarck OMB will present new projections of revenue based on the newest trends affecting the economy of North Dakota.  That will give your lawmakers plenty of time to make adjustments to proposed spending for the next biennium.

In the mean time they will have plenty to occupy their time.  One thing I believe they should do is pass a bill appropriating money to the energy impacted counties and political subdivisions.  Maybe not as much as the counties and subs think they deserve but at least enough to take care of some identified needs that shouldn’t be ignored.  Put an emergency clause on it so the funds are available ASAP.

Another area I will spend some time on in a later article is how to get out of the property tax business.  I don’t think it was wise for legislators to get sucked into that vortex no matter what some of the readers of this blog think.  The legislators should start figuring out how to extricate themselves before it becomes the mill stone around their neck.

They should also dispose of any thoughts of getting into the pre-kindergarten issue.  It is just another way to get sucked into state spending on an issue that isn’t anybodies concern except the local school district.  I know the advocates will march out the heartless concern for children of those who oppose the measures.  Sometimes it is hard to say no.   If the patrons (read taxpayers) of a school district want to provide the service it is their responsibility to pay for it at the local level.  I can see a lot of pitfalls going down that road with most having a lot of money written all over them.