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Patrick Springer, Published May 07 2013

Like its economy, North Dakota’s government spending is booming

FARGO – At a time when many states are pinching pennies to balance their government budgets, North Dakota just increased education funding, allocated billions to infrastructure improvements and provided $1.1 billion in tax relief.

In recent days, North Dakotans have been asking Gov. Jack Dalrymple if it is realistic to do all that at once.

“I have to say to them: It’s unbelievable, but we actually can,” Dalrymple said Tuesday. “Things are that good with the economy in North Dakota that we can do all those things.”

But while the state is seeing major gains from its booming energy sector and tax base across nearly all sectors, the size of its commitments and budgets also continues to grow.

North Dakota’s government budget has more than tripled in just eight years, starting in 2005-07, when the Bakken Formation oil boom started to take hold.

The general fund budget has swelled from $1.9 billion in 2005-07 to $6.6 billion in the upcoming 2013-15 budget, or almost a 3½-fold increase.

The most dramatic budget increases during that period have been from one-time investments in roads, water projects and other infrastructure associated with the boom.

One-time general fund appropriations jumped from $8.8 million in 2005-07 to more than $2.2 billion in the upcoming 2013-15 budget – a 250-fold increase.

Ongoing budget appropriations, representing normal government operations, increased at a somewhat lower rate, from

$1.9 billion in 2005-07 to $4.6 billion slated for 2013-15.

Dalrymple, who presented highlights of the upcoming budget in a meeting Tuesday with The Forum Editorial Board, said the increase in North Dakota’s ongoing spending is sustainable and reflects the dramatic growth in the state’s economy.

Still, Dalrymple acknowledged that the billions of dollars of investments the state has made in recent years sounds astronomical in a place that struggled through many lean years before the economic boom took hold.

The oil boom, which has brought significant population growth, pressure for affordable housing, and wear-and-tear on roads and highways, requires significant infrastructure upgrades that simply can’t be ignored, Dalrymple said.

“The infrastructure needs are great out there,” the governor said, adding that decades of deferred maintenance on roads, bridges and buildings also demanded attention.

The 2013-15 budget also provides more than

$850 million in property tax relief, including $656 million provided through a new K-12 funding formula that will have the state paying about 80 percent of the cost of educating each child, reducing the cost for local schools.

Another $250 million in income tax relief was provided, including $200 million for individuals and

$50 million for corporations, with total tax relief totaling $1.1 billion for 2013-15.

Despite the significant spending on infrastructure, education and tax relief, the state’s budgetary reserves also are healthy, Dalrymple said.

Budget reserves set aside are expected to total

$2.655 billion by 2015. By 2017, the Legacy Fund, which sets aside 30 percent of state oil and gas revenues, is projected to exceed $2.9 billion. The Legacy Fund now totals about $1 billion.

“So if we did hit a wall, we are going to get through it without a lot of pain and suffering,” Dalrymple said.

Officials and legislators have been careful to ensure that ongoing budget spending tracks with the growing economy, the governor said.

“When your economy is twice as big as it was 10 years ago, it stands to reason that your government will be twice as big,” he said.

North Dakota’s gross state product, a measurement of the economy, has grown from $19.1 billion in 2001 to $40.3 billion in 2011, according to figures from the Bureau of Economic Analysis.

In North Dakota, state and local spending for the 2013 fiscal year was 4.8 percent of the state’s gross state product, according to usgovern

mentspending.com.

That compared to 2 percent for South Dakota and 2.2 percent for Minnesota, according to the website’s figures.

A comparison of state government spending from 2000 to 2010 by the Tax Foundation showed that, adjusted for inflation, North Dakota per-capita spending increased 29 percent during those 10 years.

That compared to 28 percent for Minnesota and 38 percent for South Dakota, according to the foundation’s figures.

An advocate of smaller government said North Dakota’s government has grown too much in recent years.

Increases in the ongoing cost of government become a burden for taxpayers, said Zack Tiggelar of the North Dakota Policy Council.

“We’re not doing North Dakotans a huge favor,” he said.

Because of rising property values, many North Dakotans really haven’t noticed the benefit of property tax relief, Tiggelar said.

As a result, he said, there could be greater public support for repealing property taxes, a proposal voters rejected in 2012.

Dalrymple concedes that property tax relief cannot prevent property tax increases resulting from increasing property values.

“If your home is worth more, that’s a good thing,” Dalrymple said. Still, he added, voters must make their wishes known to local officials, including public schools, which levy property taxes.


Readers can reach Forum reporter Patrick Springer at (701) 241-5522