Unless you’ve been in a coma or live in a cave somewhere, you are aware that North Dakota’s economy has been feeling the effects for quite some time now of slumping agricultural and oil prices. The most recent report from May shows revenue $13.5 million under forecast.
Tax Commissioner Ryan Rauschenberger is attributing the shortfall to decreases in income and the number of taxpayers. An analysis that certainly proves true, but the long-term implications are significant.
If people are making less money, they are not only going to pay less income tax, but they are likely going to spend less going forward as well. Which means that sales tax revenues could continue to see a decline. A fact that could prove significantly problematic for the state, because sales tax is the state’s largest source of revenue.
Just today, Governor Doug Burgum declared 26 of North Dakota’s 53 counties to be in a “drought emergency”. WTI Crude Oil closed the day at $43.01/barrel– down from a high of over $54/barrel back in April.
The North Dakota Legislature recently completed a session in which they reluctantly reduced spending. Those of us in the world of limited government and fiscal responsibility warned that the final budget was still far too optimistic and that they didn’t cut enough.
At the conclusion of the Legislative Session, I wrote an article titled, “North Dakota’s Spendthrift Legislature Kicks the Can”. To conclude that article, I wrote this:
“I should point out that there are true fiscally conservative Republicans who have advocated for deeper cuts this session. The problem is that there hasn’t been enough of them. Especially in the Senate. They’re outnumbered by those who prefer to spend; hoping that oil and agricultural commodity prices will rebound and enable them to continue acting more like Democrats than the Republicans they espouse themselves to be .
“As the spendthrifts gamble with the economic future of North Dakota, the 2019-2020 legislative session may very well be a tough one. Hold onto your pocketbook. With the lack of resolve to cut deep and embrace small government, things may get ugly in the years to come .” (Emphasis Added)
Now, just two months removed from those comments – and their gamble – the picture is grim and the future indeed looks bleak. There’s trouble ahead that will require the Legislature to do what it should have had the resolve to do in the first place… cut, cut, cut. That is unless they decide to raise taxes.
The sad thing is that it didn’t have to be this way. Even with the downturn, numbers are still higher than pre-Bakken Oil Boom. Unfortunately, the State Capitol is dominated by spendthrifts, not true small-government Republicans. And that doesn’t bode well for taxpayers in the days ahead.
1. http://bismarcktribune.com/news/state-and-regional/income-number-of-taxpayers-drop-in-north-dakota/article_ddcf5996-d05f-5e42-bf4c-74f3392f7a51.html 2. https://cascade.madmimi.com/promotion_images/1858/5364/original/May_2017_OMB.png?1497891198