Please Don't Insult Our Intelligence North Dakota Budget Officials

Over the weekend Fox News ran an article about the impact of oil prices on state budgets (citing some of my work, I’m proud to say). But these comments from  Sheila Peterson, director of the Fiscal Management Division of North Dakota’s Office of Management and Budget, caught my eye for being problematic.

“The only direct oil revenue that goes into our general fund is about $300 million out of a $6 billion budget,” Peterson told Fox News. “We still expect to get the $300 million from direct oil taxes.”

According to North Dakota’s OMB, the oil tax composes only 5 percent of North Dakota’s general fund revenue.

Those statements are true. They’re also completely misleading.

Yes direct oil tax revenues into the state’s general fund are capped at $300 million per biennium. But to say that is the extent of oil’s impact on the state’s general fund finances is a little ridiculous.

For instance, the state sales tax which flows entirely into the general fund is down 14.6 percent or more than $77 million through November compared to the same point in the previous biennium according to the latest OMB revenue report. It’s down more than $163 million from what state lawmakers projected it would be at this point in the 2015-2017 biennium.

That’s a dramatic impact on the state’s general fund, and it is attributable almost entirely to the decline in oil and gas activity in the state.

The same can be said of the state’s decline in personal (down $41.3 million) and corporate (down $38.2 million) income tax revenue.

And let’s not discount the impact of decreased revenues outside of the general fund. Heading into the 2015-2017 biennium Governor Jack Dalrymlpe’s executive budget called for $7.232 billion in general fund spending and another $4.8 billion in special fund spending.

Special funds are the “buckets” state policymakers often refer to which are filled with revenues from many sources, but mostly oil and gas activity.

Obviously, the Legislature made changes to that executive budget, but it illustrates just how dependent the state is on special fund spending which doesn’t show up in general fund accounting.

If we talk about the state’s revenue and spending situation only in the context of the general fund we’re missing billions and billions of revenues and spending which take place outside of the general fund which are impacted by oil revenues much more dramatically than the general fund is.