Gov. Burgum finds ND Legislature’s budget transparency lacking
Governor finds Legislature’s budget transparency lacking
Gov. Doug Burgum identified both hits and misses in the $4.8 billion budget approved by the 2019 Legislature during an editorial meeting with the Minot Daily News Friday.
Having penned few vetoes, Burgum largely supported the direction the Legislature took, although he said there were areas where the state could have done more, “particularly when we’ve got the cash available to do it.”
“I think we had some missed opportunities that were significant,” Burgum said.
Those areas included shoring up the employee pension fund, funding university and private-partnership research, creating high school career academies like one in Bismarck and using Legacy Fund earnings to create a revolving loan fund for schools and political subdivisions.
Burgum’s administration also had proposed directly allocating oil tax revenue to the general fund rather than having the Legislature transfer money into the general fund to pay for general-fund expenses.
Joe Morrissette, director of the Office of Management and Budget, said the use of transfers makes the budget structurally unbalanced. He explained the state’s bond rating is hurt by an unbalanced general fund, where transfers will total $850 million next biennium. The cost of borrowing by public schools and other agencies is affected by the state’s lower bond rating.
Burgum said by depriving the general fund of a direct appropriation, legislators disguise the state’s financial position during the budget process, adding that often it’s legislative leaders hiding information from other legislators.
“So there’s a purposeful approach to try to suggest that there’s no money through the whole session, and then at the last minute, we were able to somehow transfer in the exact amount to cover it,” he said. “That’s the part where we feel it’s less transparent than it should be, because both the appropriators should know what the financial position is as they’re making appropriation decisions and taxpayers should be able to easily understand what that is. This masks some of that.”
Burgum offered a similar argument for his veto of a section of the Office of Management and Budget bill in which legislators determined Legacy Fund earnings deposited at the end of a biennium can’t be spent until the following biennium. He said budgets should treat Legacy Fund estimated earnings as income in the biennium received, just like all other sources of income. Legislators also used a forecast showing only $100 million in Legacy earnings going forward when the amount this biennium is estimated to exceed $400 million, he said.
“That was like the disappearing Legacy earnings,” Burgum said. “It wasn’t just conservative. It was manipulative – to suggest that there wasn’t enough revenue.
“This matters to us about transparency and how we run government because we think it affects decisions,” he added. “With more transparency, at the last day we might have passed on-time funding, which would have really helped all of our growing school districts and communities and workforce.”
On-time funding addresses the lag in adjusting per-pupil payments to current enrollment, which hurts growing districts. Considering the amount of state money available, legislators moved toward on-time funding at a much slower rate than Burgum preferred.
Burgum supported the Legislature’s decision to study the use of Legacy Fund earnings. Rep. Corey Mock, D-Grand Forks, had proposed a bill requiring a vote of legislators to transfer earnings to the general fund rather than having earnings transfer automatically. The bill died but a study was approved.
However, Burgum spoke about using the earnings to generate returns from legacy projects rather than re-investing and trying to gain returns from Wall Street investments. As an example, he cited the leveraged private investment and tourism returns associated with a proposed Theodore Roosevelt Library, for which he had recommended using Legacy earnings.
“This idea that we’re going to make it harder to spend, lock it up, save ourselves from ourselves, save it for a rainy day – and then they show the thing (Legacy Fund) is huge over time. Well, that’s compounding a market rate return for a long period of time. That’s how you get that number. I would like to compound a number higher than market rate return,” Burgum said, citing the taxes and economic activity that legacy projects can generate.
Burgum listed among legislative achievements the elimination of the Sunday closing law, professional license reciprocity for military spouses, a study next biennium on criminal justice reform, tribal partnerships related to the oil industry, increases in funding for behavioral health and property-tax reduction through state funding of county social services.
Burgum acknowledged the state is coming off a tough biennium in which belt tightening was necessary.
“Some states might take a decade to heal from what we went through,” he said. “Two years ago, expenses were exceeding revenues and in a pretty extreme way, and that’s why we had to drop all the savings accounts. Now we have revenues exceeding expenses, and some of that is because we’ve been able to hold spending in check.”
He noted the $4.8 billion budget is up from the $4.3 billion in the current biennium, but still $1.2 billion below two years ago and $2 billion below the peak in 2013-15. The forecast is to have about $400 million in savings in the Budget Stabilization Fund at the end of the biennium.
The $1.17 billion general fund budget for 2019-21 is a record when looking at general fund spending. General fund spending is $83 million for 2017-19. It had peaked at $1.16 million in 2013-15.
Much of the revenue supporting the budget comes from oil and gas money, Burgum said.
“Everybody ought to get up in the morning and say thank you, oil and gas industry, because that’s where there’s so much revenue coming into our state that helps fund all the general fund and special fund activity that we’re able to do,” he said.