North Dakota moves to budget cuts as oil industry stalls

posted at 5:21 pm on February 2, 2016 by Jazz Shaw

We’ve previously discussed some of the well understood fallout from crashing oil prices and that pattern is continuing. On the plus side, consumers are saving some serious cash on gasoline and heating, but we’re taking a hit on the jobs front and state governments which rely heavily on such profits are feeling the pinch. North Dakota is no exception, having the second biggest energy production sector in the nation and the lowest unemployment rate as well. Now, as wells go idle, workers are let go and revenues decline, the state has had to look at tightening its belt. Their governor began those measures this month, staving off a serious budget shortfall. (Yahoo News)

North Dakota Gov. Jack Dalrymple ordered deep cuts to government agencies and a massive raid on the oil-rich state’s savings on Monday to make up for a more than $1 billion budget shortfall due to a drop in oil drilling and depressed crude prices.

The state had more than $2 billion in various reserve accounts just one year ago, but oil prices — a key contributor to the state’s wealth — have taken a nosedive in the past year.

North Dakota is the nation’s second top oil-producing state, behind only Texas, and has the lowest unemployment rate in the country at less than 3 percent. But the Legislature’s record-high $14.4 billion budget for the two years that began July 1 was built on oil prices and economic assumptions that have fallen “much greater than anyone would have predicted,” the governor said.

So it’s time to panic, right? Not really. While nobody is calling this good news, North Dakota has been under the management of Dalrymple and a conservative majority for a while now. Rather than simply finding ways to blow all the revenue they realized during the oil boom, North Dakota took the shocking and revolutionary step of putting some money away in a rainy day fund against just such a downturn.

While other states have scrambled to increase taxes when they hit a budget shortfall, North Dakota is going a different route. First, the Governor ordered all state agencies to cut their budgets by a little more than 4% and make do with less. They also began stuffing money in their state Budget Stabilization Fund when the oil boom started and have squirreled away cash in that every year. The Governor was able to free up nearly $500M from that fund, still leaving a fair portion available if it’s needed later. If the downtrend continues, they have $875 million in other surplus funds and another $3.5B in a “Legacy Fund” which will be available starting next year.

Isn’t it amazing what a state can do when they don’t spend every dime they can lay their hands on as soon as it comes in the door? Through conservative policies and making full use of their natural resources, they were able to anticipate a period when the market might tank and prepare for it. Rather than dumping the problem in the laps of their taxpayers, they prepared for the lean times and were ready to handle them when they arrived.

JackDalrymple2


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Comments

Wow, someone who actually makes their budget fit their income, and doesn’t just spend money like water? I’m shocked, good for them!

RblDiver on February 2, 2016 at 5:24 PM

While other states have scrambled to increase taxes when they hit a budget shortfall, North Dakota is going a different route. First, the Governor ordered all state agencies to cut their budgets by a little more than 4% and make do with less.

Saving money and cutting the budget, now that’s crazy talk.

rbj on February 2, 2016 at 5:25 PM

…they were able to anticipate a period when the market might tank and prepare for it. Rather than dumping the problem in the laps of their taxpayers, they prepared for the lean times and were ready to handle them when they arrived.

Kill them with fire!!!

/lefties

trigon on February 2, 2016 at 5:28 PM

Utah does this too. Much to the dismay of leftists, who are always screaming to “Spend it, spend it, SPEND IT!!!!!” (yes, with the exclamation points).

And that rainy day fund came in mighty handy during 08-10, let me tell you.

Course, the Utah Democrat party doesn’t want you to remember that. I’m sure other states besides Utah and North Dakota have these funds.

I’m also sure that California, Illinois, and Mass do not.

Vanceone on February 2, 2016 at 5:30 PM

Isn’t it amazing what a state can do when they don’t spend every dime they can lay their hands on as soon as it comes in the door?

Or pre-spend revenues that haven’t even been collected yet.

antipc on February 2, 2016 at 5:30 PM

What’s this crazy talk about cutting a budget?

Don’t they realize that this is 2016!

Politicians don’t do that anymore..at least not around here or in DC..

celt on February 2, 2016 at 5:43 PM

iirc most states required to have balanced budget too.
amazing huh?

dmacleo on February 2, 2016 at 5:48 PM

I’m also sure that California, Illinois, and Mass do not.

Vanceone on February 2, 2016 at 5:30 PM

In addition California has 10’s of billions in pension liabilities. Maybe even after this month.

Oil Can on February 2, 2016 at 5:51 PM

North Dakota remembers life before they had their oil boom. And planned accordingly. Good on them.

DStreete on February 2, 2016 at 5:53 PM

I’m always conflicted on Rainy Day Funds. On one hand, I see the logic in it, but at the same time, I wonder if it would be better to just lower taxes when you don’t need the money.

Of course, if our little town of 200 had thought ahead 20 years or so ago when there was more than 200 people in town, and they had saved some money for infrastructure projects (electric upgrades and water mains) we wouldn’t be $600,000 in the hole.

cptacek on February 2, 2016 at 5:54 PM

On the plus side, consumers are saving some serious cash on gasoline and heating, but we’re taking a hit on the jobs front and state governments which rely heavily on such profits are feeling the pinch

It’s great to be in California where gas is still $2.85 a gallon!

Ditkaca on February 2, 2016 at 6:04 PM

It’s great to be in California where gas is still $2.85 a gallon!

Ditkaca on February 2, 2016 at 6:04 PM

$ 1.43/gal in South Dakota

trs on February 2, 2016 at 6:32 PM

The Governor was able to free up nearly $500M from that fund, still leaving a fair portion available if it’s needed later. If the downtrend continues, they have $875 million in other surplus funds and another $3.5B in a “Legacy Fund” which will be available starting next year.

Treasury-mandated negative interest rates will put an end to rainy day funds.

Is there anything more insane than outlawing savings as an effort to boost an economy?

BobMbx on February 2, 2016 at 6:37 PM

A republican governor did this for Michigan, then a democrat (granholm) got in and burned it all away in a year, then raided the catastrophic no-fault fund, and still had nothing to show for it. Michigan roads and bridges? Pshaw, who needs that, right? Schools? Screw you, we’ll play hide the wienie with lottery money and call it solved.

Now we have another republican in office, and HE keeps trying to steal the catastrophic fund while sending huge amounts of money to the road mafia, where nothing is being done.

I hope one day, soon hopefully, this state actually goes conservative. Slobberal heads will assplode.

Andy__B on February 2, 2016 at 6:37 PM

we wouldn’t be $600,000 in the hole.

cptacek on February 2, 2016 at 5:54 PM

$10 says the debt is directly related to social spending. When that stopped or slowed, the locusts moved elsewhere.

BobMbx on February 2, 2016 at 6:39 PM

Treasury-mandated negative interest rates will put an end to rainy day funds.

Is there anything more insane than outlawing savings as an effort to boost an economy?

BobMbx on February 2, 2016 at 6:37 PM

If that happens, every dime I have is coming out of the bank. All of it.

Andy__B on February 2, 2016 at 6:40 PM

Since Texas’ budgets are done bi-annually, the Legislature won’t meet to do the next once until a year from now, unless Gov. Abbott calls a special session. But the state also has a Rainy Day Fund so it has surplus revenues — where it’s going to take a hit is in the law voters approved last year that would take money out of that for highway repairs if the fund was at a certain level and revenue targets were met.

That may not happen with $30 a barrel oil, so some road projects that were projected to be funded with the surplus could end up remaining on the back burner for a while (the only real fight going on at the moment is over where the Texas Comptroller Glenn Hegar’s office sets its 2016 estimates for oil prices to use for budgeting purposes in 2017, since the revenue estimate the Lege will use next January is based on a three-year rolling average).

jon1979 on February 2, 2016 at 6:45 PM

Isn’t it amazing what a state can do when they don’t spend every dime they can lay their hands on as soon as it comes in the door? Through conservative policies and making full use of their natural resources, they were able to anticipate a period when the market might tank and prepare for it. Rather than dumping the problem in the laps of their taxpayers, they prepared for the lean times and were ready to handle them when they arrived.

Seems to me I read a story somewhere with that theme….

AesopFan on February 2, 2016 at 9:31 PM

iirc most states required to have balanced budget too.
amazing huh?

dmacleo on February 2, 2016 at 5:48 PM

Yes, but if ND had different leadership, they might have decided to raise taxes to balance the budget instead of cutting spending.

J.S.K. on February 2, 2016 at 10:42 PM

another republican disaster state, exposed as just an oil exploiter with unworkable policies, and now the voters will pay for it.

so sad.

everdiso on February 3, 2016 at 12:53 AM

Get this man in the Presidential race, stat!

LoganSix on February 3, 2016 at 9:52 AM

another republican disaster state, exposed as just an oil exploiter with unworkable policies, and now the voters will pay for it.

so sad.

everdiso on February 3, 2016 at 12:53 AM

Ummm….what?
What are the voters going to pay for?

No tax increase.
4% in government spending, but they still have to provide the same services. Which were less than other states, because before they didn’t spend on silly stuff.

This is what the voters wanted. A responsible government.

LoganSix on February 3, 2016 at 9:55 AM

I’m always conflicted on Rainy Day Funds. On one hand, I see the logic in it, but at the same time, I wonder if it would be better to just lower taxes when you don’t need the money.

cptacek on February 2, 2016 at 5:54 PM

Except for the constant raising and lowering of taxes causes more issues for the citizens than a constant tax rate.

LoganSix on February 3, 2016 at 9:56 AM

Ummm….what?
What are the voters going to pay for?

No tax increase.
4% in government spending, but they still have to provide the same services. Which were less than other states, because before they didn’t spend on silly stuff.

This is what the voters wanted. A responsible government.

LoganSix on February 3, 2016 at 9:55 AM

lmao.

Another republican state gone bankrupt thanks to idiot policy, having to resort to slashing budgets and raiding one-time emergency funds at the first sign of trouble.

what an unsurprising disaster.

everdiso on February 3, 2016 at 12:18 PM

Another republican state gone bankrupt thanks to idiot policy, having to resort to slashing budgets and raiding one-time emergency funds at the first sign of trouble.

what an unsurprising disaster.

everdiso on February 3, 2016 at 12:18 PM

Does California have a rainy day fund at all?

4% cut isn’t that deep of a slash.

You didn’t read the article, did you? They are only taking money out of one of their funds. By the time the new budget is made, they will still have money in those funds.

LoganSix on February 3, 2016 at 12:26 PM

yes I read the BS spin. and it made me lol.

The story here is a simple one – yet another republican state economy in shambles due simply to a fall in price of a single commodity, resorting to slashing budgets and raiding single use emergency funds.

And yes, California has a $7 billion rainy day fund.

everdiso on February 3, 2016 at 1:31 PM

The unions are going to be really po’d…..the state has uncommitted money and hasn’t offered them any new graft.
Watch for the coming strike….the gimmiesomes are growing restless.

Sgt Stryker on February 3, 2016 at 1:59 PM

yes I read the BS spin. and it made me lol.

The story here is a simple one – yet another republican state economy in shambles due simply to a fall in price of a single commodity, resorting to slashing budgets and raiding single use emergency funds.

And yes, California has a $7 billion rainy day fund.

everdiso on February 3, 2016 at 1:31 PM

Ha ha ha

gwelf on February 3, 2016 at 3:33 PM

$10 says the debt is directly related to social spending. When that stopped or slowed, the locusts moved elsewhere.

BobMbx on February 2, 2016 at 6:39 PM

Nope. The state made us replace the electric lines and we didn’t have anything saved. One bond, over $300,000, with interest over the life of it which we are told we can’t prepay is about $600,000.

cptacek on February 3, 2016 at 4:46 PM

Except for the constant raising and lowering of taxes causes more issues for the citizens than a constant tax rate.

LoganSix on February 3, 2016 at 9:56 AM

Why do you say this? Why wouldn’t it be better to not take so much money when you don’t need it and then take more when you do?

cptacek on February 3, 2016 at 4:47 PM