ND tax revenue growth still strong but slowing

By Rob Port | Watchdog.org North Dakota Bureau

BISMARCK, N.D. — North Dakota continues a trend of strong tax revenue growth in the 2013-15 biennium, though that growth has slowed.

Through May, according to the latest numbers from the state Office of Management and Budget, North Dakota has collected more than $2.7 billion in general fund revenue, $419.9 million more than the 2011-13 biennium so far. That represents a 18.4 percent increase.

That’s a strong increase, but at this point in the past biennium revenue has grown nearly 62 percent. The pace of revenue growth seems to be slowing, but over the past several bienniums the increases in tax collections have been explosive, increasing more than 117 percent over this same point in the 2007-09 biennium.

Sales tax collections make up the bulk of an increase in general fund revenue, increasing $150 million so far over the previous biennium — a 15.8 percent.

Personal income tax collections make up the second largest area of increase, despite significant cuts in rates passed by the Legislature in 2013. So far personal income tax collections are up $84.7 million, or 21 percent. Corporate income tax collections are up $33.4 million or 21 percent.

Current biennium revenues also continue to exceed the legislative forecast used for budgeting and spending purposes, though the margin of error has also been more moderate. So far in the current biennium revenue has exceeded the state’s forecast by 8.1 percent, or more than $202 million. At this point in the 2011-13 biennium state revenue exceeded the legislative forecast by more than 40 percent, or $651 million.

The gap between the revenue forecast and actual revenues has drawn criticism. Earlier this year former state lawmaker Thomas Fibiger, a Democrat, warned that inaccurate forecasts hurt the budgeting process.

“When you continue to be off that much, and that often, something is wrong,” he wrote in a letter to the Fargo Forum. “And to simply be grateful for having more money coming in than expected without critically examining why there’s such a disparity in projections is not the right tune to be singing.”

OMB Director Pam Sharp defended the forecast, which was off by more than $1 billion overall in the 2011-13 biennium, saying the state’s revenue growth has been “unprecedented.”

Fiebiger isn’t convinced.

“When (Sharp) talks of unprecedented growth after experiencing years of such continued growth, when does it ever become precedented?” he told Watchdog.