Published June 18 2013
North Dakota general fund revenue beats forecast by $1.6 billionBISMARCK – Revenue streaming into North Dakota’s general fund has surpassed the state’s forecast by $1.6 billion with one month left to go in the two-year budget cycle, state Budget Director Pam Sharp reported Tuesday, prompting one lawmaker to ask, “How can we be that far off?”
Rep. Kathy Hawken, R-Fargo, posed the question after Sharp presented figures to the Legislature’s interim Budget Section showing that revenue for the current biennium totaled $4.95 billion through May. That’s up 48 percent from the legislative forecast released by the Office of Management and Budget in April 2011.
The higher-than-expected revenue is expected to leave the general fund with a $1.7 billion surplus by the end of the month.
Sharp explained Tuesday that the forecast was based on nearly three-year-old numbers, from the summer and fall of 2010.
“And if you just even look at what has happened in North Dakota in the last three years, it’s just been phenomenal growth,” she said.
The state’s crystal ball was cloudy, Sharp said, echoing a statement by Hawken.
“We didn’t know how fast things were going to happen in the western part of the state, plus ag and everything else has been extremely strong, as well,” Sharp said, referring to rapid oil development in western counties and favorable seasons for the state’s agriculture sector.
The large gap between forecasted and actual revenues is a concern because lawmakers base spending decisions on such forecasts, Hawken said after the meeting.
“Our group tells us the world, the sky is falling, we can’t pay our bills … so we can’t do things like fund pre-K or health issues,” she said, referring to her own Republican majority in the Legislature. “It stresses me that we are so far off that we aren’t doing some of the things that I think we should be doing.”
Sharp said Moody’s Analytics significantly changed the forecasting model for 2013-15 to more accurately reflect the state’s economic activity. The forecast calls for an additional $87 million surplus by the biennium’s end.
“What we still don’t know is, in the west, exactly when that peak is going to hit, but we do believe we have a better model,” she said.
The state began the current two-year budget cycle with a general fund balance of $1.1 billion.
Actual revenues collected through May totaled $4.95 billion, and an estimated $172.9 million is expected to be collected in June, which when added to the starting balance will lift total revenues to
State lawmakers approved nearly $4.4 billion in spending and carryover, which will bring the balance down to about $1.85 billion. After
$181 million is transferred to the budget stabilization fund, the general fund will have an estimated surplus of $1.66 billion by June 30, the end of the current biennium.
That’s about $190 million more than the estimate provided to state lawmakers before they adjourned in early May, Sharp said. She cited “exceptionally strong” revenues in April, most of it from individual income tax and sales tax, as well as strong revenues last month.
Final figures for the biennium are expected to be presented at the Budget Section’s next meeting on Sept. 25.
In other business, the Budget Section approved about $40 million in spending to cover the costs of disaster relief efforts dating from flooding in 2009 to heavy rains this spring. The state’s Emergency Commission had approved the funding last week.
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