Thursday, August 4, 2016

ND Legislators Pass Budget Bill in Special Session

It was a historic moment. But not a moment you really want to experience. For only the 15th time in state history - the North Dakota Legislature was called in to a special session. They were asked to pass a bill created to bridge a budget gap created primarily by the plunging oil market. Yes, it was a moment Legislators hope they never have to repeat.

You may remember in February, Governor Jack Dalrymple ordered across-the-board reductions of 4.05% to state funded agencies. That allotment simply wasn't enough to make up for the decrease in tax dollars flowing into the general fund. The Governor can only authorize across-the-board cuts. He needed to call the Legislature back to work to approve more targeted reductions and to tap other funds.

The three day special session focused only on fixing the budget. The Governor and leadership crafted the bill and while others had their own ideas on how to improve it - those concepts were not adopted.
The bill makes an additional 2.5% reduction to state agency budgets; with the 4.05% that was authorized earlier in the year - state agencies are ordered to reduce their budgets a total of 6.55% from what the Legislature approved in the 2015 Legislative Session. The 6.55% in reductions will total approximately $400 million. In addition, the bill spends $75 million in the Budget Stabilization Fund which was created for times like this (it is often referred to as the rainy-day fund). That fund will now have a zero balance. Also, up to $100 million from Bank of North Dakota profits can be used if necessary.

It is important to note that Department of Human Services will not see the 2.5% reduction and the Department of Corrections and Rehabilitation will only have its budget cut 1% vs 2.5%. These special exceptions were given to the agencies because of how detrimental further budget reductions would be to the services they provide.

These reductions follow several years of exponential growth in state government spending. The general fund budget more than tripled since 2005 primarily in response to the rapid growth in oil activity in the state. 

Following the special session, Pam Sharp, with the Office of Budget and Management gave a look at the most recent revenue forecast for the next biennium. It was prepared with the "worst case scenario" in mind; in order to prevent a situation of over-projecting revenues. The 2017-2019 forecast shows a 4.9% increase in tax revenues or $175 million more collected in comparison with the 2015-2017 biennium. The forecast  projects an increase in oil and gas tax revenues as well, while using very modest numbers. It is basing tax collections on production going down to 900,000 barrels per day and averaging $42 per barrel in 2017 but rising to $58 per barrel in 2019. Current oil production is 1 million barrels per day and the price for a barrel of oil is just below $40 a barrel.

This chart does provide an interesting perspective. Look at the collections in the first three bienniums on the chart, starting with 2005-07. Compare those with the 2015-2017 forecast. It shows we are still seeing growth in revenues over the 2009-11 biennium.

County 911 Centers Reach Major Milestone

The new network replaces a decades-old system of analog telephone lines that limited 911 centers from receiving anything more than basic voice and location data.  911 centers will continue to serve the public as they always have but the completion of this new IP-based network has prepared them for future delivery of new types of media from the public including text messages, pictures, videos and more.  

This is a major milestone for the State of North Dakota as it joins only a handful of states nationwide to make such an profound advancement in 911 service.  This upgrade is the foundation for future services like Text to 911 being available in North Dakota. That service should be available in the state in the next few months.


Wednesday, August 3, 2016

ND Senate Approves Budget Bill

The Senate unanimously approved a budget bill aimed at addressing the state's projected revenue shortfall. Senate members debated for two hours over proposed amendments. The amendments were targeted at restoring cuts made to the property tax relief fund and the Department of Human Services.
The bill authorizes 2.5% budget cuts from state agencies. This is in addition to the 4.05% cuts Governor Dalrymple authorized in February. The bill authorizes the use of $75 million from the Budget Stabilization Fund and $100 million from Bank of North Dakota profits.

The House Appropriations Committee also discussed possible amendments, none of which were given committee approval. The House will vote on the bill Thursday morning.

Legislators will get a briefing on the 2017-2019 revenue forecast following the final approval of the budget bill.

Monday, July 18, 2016

Special Session to Address Revenue Decrease

North Dakota Legislators will return to the Capitol in August to address necessary General Fund budget adjustments for the 2015-2017. Governor Jack Dalrymple issued an executive order, calling for the special session to begin August 2, at 9 a.m.

The state's latest revenue forecast projects that without corrective action the General Fund would fall $310 million short by the end of the current biennium.

The Governor only has the authority to make across-the-board cuts to budget. That is why a special session is necessary. Lawmakers have the power to make more targeted budget cuts and adjustments. They also will have the authority to authorize the use of dollars in other funds. It is important to note that the State has $9 billion in various other funds, some of which can be accessed.
The Governor and majority leaders said the shortfall can be remedied without any reductions to K-12 school funding and without further budget reductions within the Department of Human Services. Additionally, the Department of Corrections and Rehabilitation will also receive special consideration in the budget plan.

“I have talked with legislative leaders from both parties and we all believe a combination of some targeted, short-term budget adjustments and the use of some contingency funds offers the best path forward to ensure that the budget is balanced when the biennium comes to an end a year from now,” Dalrymple said. “We are fortunate in North Dakota that our Legislature had the foresight to guard against a major revenue downturn by focusing on one-time capital investments rather than ongoing appropriations, and by setting aside strong cash reserves.

Dalrymple said he will be working with the Office of Management and Budget to identify additional savings that will minimize impacts on public services. He will forward his recommendations for reductions to the Legislature.

NDACo's assessment of the recent updated forecast reveals some promising indications for the future. The revised projections show an increase in oil tax revenue compared to the forecast released in January. This will mean an increase is expected in state trust funds as well as oil tax revenue that flows to producing counties.

Wednesday, May 4, 2016

Governor Dalrymple Issues Budget Guidelines to State Agencies

Governor Jack Dalrymple has directed state agency leaders to develop budgets equal to 90 percent of their 2015-2017 appropriations for the next biennium. The governor also noted that due to the across-the-board cuts made in February, the current budget will remain balanced at the end of the biennium. 

“We begin work on the 2017-2019 budget in a much different environment than at this time two years ago. With tax revenues falling short of projections, we must find greater savings and efficiencies while continuing to provide high-quality services for the people of North Dakota.”

He suggests that many of the reductions identified during the 4.05 percent allotment could be continued into the next budget cycle, but agency leaders are not locked into the decisions they made to meet the allotment.

The governor stressed the importance of agency leaders finding efficiencies while still providing the essential services to the citizens of North Dakota.

The North Dakota Department of Human Services and the North Dakota Department of Corrections and Rehabilitation will not be strictly held to the 10 percent budget reduction because additional consideration must be given to services that impact public safety and the state’s vulnerable citizens.  

During the past two legislative sessions, lawmakers have focused the use of its strong cash reserves on one-time capital projects, allocating millions of dollars towards roads, water projects, and college campus improvements. 

“We have always said the day would come when large one-time investments in capital projects would no longer be possible. Ladies and gentleman, that day has come,” said Dalrymple. (Video clip below) 


In developing the 2017-2019 Executive Budget, Dalrymple said one-time expenses for capital projects will not be funded unless they are absolutely essential.

While Dalrymple will draft the budget and present it to lawmakers in December, essentially the person elected governor in November will have every opportunity to make changes to the recommendations prior to the 2017 Legislative Session.

Friday, April 29, 2016

NDACo President Testifies on Social Service Funding

As the interim Political Subdivision Taxation Committee furthers it's discussion on transferring the cost of social services from the counties to the state, legislators look for greater information from the counties. Committee members, who are a combination of lawmakers who sit on the tax and finance and human service committees have a desire to really understand the long-term commitment in assuming these costs. Transferring the cost of county social services to the state is estimated at $100 million a biennium. This in turn, will result in a decrease in local property taxes, which is currently how social service programs are largely funded in North Dakota counties.
NDACo President Steve Reiser appears before Political Subdivision Taxation committee

NDACo was asked to respond to several committee member's questions and concerns during a hearing this week. Legislators wanted a look at the social service budgets for 2015 county by county. What NDACo President Steve Reiser provided legislators was a thorough look at the expenses associated with a county social service department. In which a majority, 87 percent, of county social service budgets are direct personnel costs including salary, payroll taxes and benefits.

The committee also requested that NDACo provide input into the appropriate growth, or inflation factor to use in calculating future reimbursements. Personnel costs are almost exclusively driven by state salary adjustments and health insurance premium changes. NDACo proposes using a blended factor to reflect growth of both salaries and insurance rather than an inflationary rate that has no direct relation to those two adjustments.

Lawmakers also wanted to explore what is the appropriate ending fund balances or reserves to be maintained by a social service unit. NDACo maintains that a certain level of reserves is critical for social service programs. A formula should be developed that also addresses ending fund balances. Legislators suggest the balances above that threshold could be deposited in the county general fund to reduce taxes.

Monday, April 25, 2016

Justice System Study Focuses on Sentences

Majority of Jail and Prison Inmates Serving Time 
for Low-Level Felonies 
CSG's Marc Pekka goes through analysis with committee members
North Dakota lawmakers are exploring what changes they can make to alleviate the crowding issues in our prison and jails. The Council of State Governments (CSG) is in the middle of conducting a Justice Reinvestment study in North Dakota.

After their recent presentation to the incarcerations committee it is clearer what possible solutions will be surfacing as lawmakers work towards developing a bill draft later this year. If Legislators don't desire to create additional space at the state prison, they will need to make major adjustments to the judicial system and beyond.

How did we get to this? Felony sentences doubled between 2011-2014. Drug offenses were the primary driver of that increase with 79 percent of the felony drug offenses being for possession. In 2014, Four out of five felony sentences were for Class C felonies, the lowest level felony. Of those, 76 percent were sentenced to jail or prison. The folks from CSG commented how this fact really struck them. That a majority of those serving time were locked up for the low-level offenses.  

CSG also noted how North Dakota is under utilizing probation. North Dakota district judges sentence felony offenders to probation in 10 percent of the sentences. That's compared to the national average of 27 percent. CSG hinted that if treatment services were improved probation may be utilized more as an option for low risk offenders instead of going to jail or prison.  

CSG left the meeting by identifying a few options for the committee think about as possible policy solutions:
 1. Avert significant increases in corrections spending by prioritizing incarceration for the high-risk most serious crimes.
2. Increase the effectiveness of supervision and probation on higher-risk probationers and parolees to reduce the risk of re-offending. 
3. Improve community-based treatment services and capacity to provide treatment options outside of the prison and jail system.

CSG plans to be back before the committee in June and again in July to discuss other areas of their analysis to include pretrial processes, recidivism, and a look at the various roles of county jails, prison, probation and parole.  They hope to review policy options in order to draft a bill in the fall.