The politics of ND’s big bad budget bind
Gov. Doug Burgum released his budget guidelines for the 2019-2012 biennium this week, and the tone of his fiscal message was grim.
We’re in for more cuts.
Burgum is asking that state agencies deliver budget recommendations for lawmakers, who will meet for their regular session in January, that reduce spending by 5 to 10 percent.
Lawmakers cut general fund spending in the current biennium by 28 percent during their 2017 session, but more is needed despite a stabilizing economy because they avoided deeper cuts by effectively draining a myriad of state reserve funds.
“We balanced the budget with $800 million of savings, but that $800 million isn’t going to be here this time,” Burgum said in a speech delivering his guidelines.
Things are improving. According to the most recent general fund revenue report from the state’s Office of Management and Budget, so far in the current budget cycle revenues are nearly $28 million ahead of forecast.
We can also safely say that Burgum’s no-nonsense tone on the budget this week is a bit of expectations management. It’s better, both politically and in terms of sound fiscal management, to err on the side of pessimism at this point.
Some degree of pessimism is warranted. General fund revenues are still down 18.4 percent — or nearly $383 million — from where they were at this point in the last biennium according to the OMB.
Yet before state officials can begin to budget again we have an election looming. What are the political implications of all this?
Democrats have an opening to hit Republicans hard on fiscal management, but already they’re botching it.
To hear Democrats such as Tax Commissioner candidate Kylie Oversen tell it, our fiscal problems stem from income and oil tax cuts.
The latter accusation is a blatant falsehood Democrats hope will be perceived as true thanks to repetition.
So far the reforms to the state’s oil tax — a reduction in the top extraction rate and the eliminate of a massive tax exemption triggered by low prices — has been a more than $1 billion tax hike on the oil and gas industry.
As for the income tax cuts, the OMB reports that collections from individuals are actually up more than $1.4 million over last biennium. Collections from corporations are down, biennium-over-biennium, but still beating the forecast in the current biennium by $30.4 million.
Changes to the tax code aren’t the problem.
If Democrats were a bit less allergic to fiscal conservatism they might start talking about the real problem, which is Republican profligacy built on the shaky foundation of revenues driven by what were booming commodity prices.
Our state’s leaders should have realized the boom times weren’t going to last. That at some point our soaring economy would regress to the mean.
Instead the Republican supermajority spent like the boom times were the new normal.
Democrats, though, can’t say too much about that. If we check the record from those years we find they were busy griping about how we weren’t spending even more.