​ND budget projections get worse

A new budget forecast for the state of North Dakota shows a little over $1 billion dollar shortfall from projections made for funding during the last Legislative session. Because of that, Governor Jack Dalrymple called on most state agencies to cut over four percent from their budgets this week. For his reaction to this news, how it happened and what it means, we interviewed ND State Rep. Kylie Oversen (D-Grand Forks), who is also Chairman of the ND State Dem-NPL party. Does this mean the end of the oil boom? Could it get worse? Read on for her thoughts.

HPR: What’s your reaction to the latest state budget picture and the news that the Governor has asked some state agencies for cuts?

Rep. Kylie Oversen: I think the amount of the budget shortfall caught me off guard. It was a little bit of surprise how large it was. It wasn’t quite what we had been discussing earlier, even this year and the end of last year. The decision that the Governor made to make across the board cuts but also pull some from our existing budget and stabilization fund and such, I think he is doing the best he can with the power that he has. But it’s unfortunate that we got to the point where the Governor had to direct agencies to make across the board cuts when something of this magnitude should have been handled by calling a special session of the Legislature. A $1 billion dollar shortfall is no small change and neither is decisions that are supposed to be made by the Legislative body and not by Cabinet members for the Governor.

HPR: How could this have been prevented? Is there something that could have been done in the last session? Do you think they were too optimistic with their projections?

KO: A couple things. At the very least and what probably would have been the best case scenario if the Republican super majority had taken responsibility and set aside a few days to call a special session. Certainly, my understanding was at the beginning of the session there was agreement amongst the leaders of both parties that it was probably a good idea to set aside up to 5 days that we could come back in the event of such a downturn and we could adapt budgets as necessary. But then what we saw at the end of the session was infighting with the Republican party on the ND PERS (North Dakota Public Employee Retirement System) budget. There was really one point in that bill that House and Senate Republican leadership couldn’t agree on and that’s why we had already called a special session a few months after we adjourned to work out those details. That could have been avoided, there was a lot of ego at play in that bill, and we could’ve saved a few days, and a lot of money if we hadn’t had to call a special session at that point and then we would’ve had that time to come back now. I think one other thing that was addressed. I know Senator Schneider of Grand Forks had looked at this, I don’t know who else had co-sponsored but a resolution to study budgets, revenue volatility, to look at where we’re at now and where we are going long term with the way our budget is focused especially on commodity prices. How can we better control that economic environment and have a little better information to plan with? I know one other thing they did talk about was doing some contingency budgeting so in the event of a downturn, here is where budget will go. Those ideas were proposed by Dem-NPL legislators and rejected by Republican leaders mostly.

HPR: Does this mean that the oil boom is over officially in North Dakota?

KO: I don’t know the answer to that. I’ve heard predictions on both sides of that, that we could be going back up to $50 to $60 a barrel or that we may be in this cycle for at least the rest of the year. Based on where we were last year and where we are at now, it’s pretty apparent that we don’t have a good handle on making those predictions.

HPR: Is there any parallels to what happened in the 1980’s when the oil boom became a bust in the state and you had public schools which didn’t end up getting promised dollars because the situation changed so quickly?

KO: I think some of the good things that came out of that downturn in the 80s is that things like the funds that we put in place to protect public education. The common schools trust fund was put into place by I believe by Governor Sinner, who led the way to create the common schools trust fund over it. That was put into place for this exact reason so that if we do have a downturn and we have to make the decision to cut budgets, it doesn’t impact public education and public schools and teachers so at the very least we know that with the cuts that are being made right now, we don’t have to worry about public school funding. That being said, I think I can speak pretty broadly that this downturn was definitely unexpected, even three years ago when we were talking about the budget and surplus in North Dakota and how well things were going, back to my first session, I think there was still a little bit of a hesitancy to make big, large scale investments in western North Dakota because there was a little bit of anxiety about how long is this going to last but at that point and even during this session, people were still pretty confident that this was going to be a long term, positive cycle for us with oil. And I have no easy answers on how long this is going to last, if it will go back up, if it will go back up enough to make a difference, so I think unfortunately some of the anxiety people had from having gone through this before were realized but were definitely in a much better place with the funds that were put aside to handle this downturn a little more responsibly.

HPR: What do you think can happen between now and the Legislative session? If the Governor’s not going to call a special session, do you pretty much have to wait until the next session in order to change things here?

KO: Yes. My understanding is based on the conference that the Governor had on Monday is that we won’t be calling a special session. He’s gave this directive to the agencies to make a little more than four percent cuts and the amount that we are taking out of the budget stabilization fund between those things, my understanding is that it’s intended to cover the shortfall and now we won’t need to come back into a special session. The budget section of the Legislature does have some authority to make decisions needed. That being said, a lot can change in just a matter of months so we might be in a difference place come the end of summer or early fall and might need to revisit this. At that point, we are only a few months away from the Legislative session but that can do a lot of damage in just a few months.

HPR: Do you expect during the next session, you guys might adjust some of the funding that the Governor decides on to cut and maybe have more of your say and also bring up some of this during campaigning this summer and fall?

KO: Absolutely. The mismanagement of this shortfall will certainly be a campaign issue. The downturn couldn’t have been avoided but we could have planned better as a Legislature for this knowing that it was a certain possibility during the Legislative session. Also the idea of contingency budgeting and studying the volatility of our revenue and generally I think a big campaign issue, something I hope people talk about is the vision for our state, where is the vision both from our Governor, from the candidates that are running now, Legislative leadership, what are we looking at for our state long term, five, ten, fifteen, twenty years down the road. It’s a really hard thing for the Legislature to do because we are caught in this two year cycle and we don’t really seek beyond often but really we need to. We need to do some more strategic, long term planning and have some conversations that I am hoping some of that will happen eventually around the Legacy Fund and how we hope to invest those dollars but I also hope it will be a little more broader than that as well.