North Dakota Oil Tax Revenues Beat Forecasts by 42 Percent in February, up 15 Percent in the Budget Cycle

Democrats have been trying to make an issue out of Republican oil tax reforms passed during the 2015 legislative session. To hear them tell it, the reforms were a give away to the oil industry. Something which has contributed to the state’s budget headaches of the current biennium (despite the fact that the reforms resulted in a more than $1 billion increase in tax collections).

Democratic lawmakers attempted to launch a ballot initiative aimed at raising oil taxes on the oil industry, but it fell flat. Kylie Oversen, a state lawmaker who lost her seat in the 2016 election cycle, has announced that she’ll focus her campaign for Tax Commissioner in part on the oil tax issue.

Meanwhile, thanks to improving market conditions, oil tax collections in the state are surging and probably wouldn’t be surging as much as they are if Democrats had gotten their way on the oil tax reforms.

Below is an update on oil tax collections provided to lawmakers by Legislative Council this week. As you can see from this table excerpted from that report, revenues were up 42 percent in February over what lawmakers budgeted for and up 15 percent biennium to date (the current two-year budget cycle started in July of last year):

Of particular note are the revenues to the Three Affiliated Tribes. Tribal officials have been feuding with the state over the oil tax reforms, suggesting that it’s costing them revenues. That their revenues were nearly double the forecast in December, and 57 percent ahead of forecast biennium to date, might quell some of those concerns.

This line chart (also from the Legislative Council report) shows the forecast for oil tax revenues and what’s actually been collected:

What’s interesting is that direct oil tax revenues never really decline in terms of the general fund budget. Oil tax revenues flowing into the general fund never fell below a statutory cap. The hit the general fund took was in declines from other revenue streams (sales tax, income tax, etc.) which were impacted by decreased economic activity associated with the state’s major industries (with oil being one of the most major).

But these unexpected revenues do flow into the various “special funds” or “buckets” (to use the parlance of the lawmakers) which in turn can be used to shore up holes in the state budget.

This is good news for the state. The oil industry is stabilizing. Revenues, so far, are coming in ahead of forecast. Let’s hope the pattern continues.

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