LEGISLATIVE HIGHLIGHTS 2013: Legislature Provides More Tax Relief, Strong Funding for Statewide Priorities
BISMARCK, N.D. – Gov. Jack Dalrymple today said North Dakota’s 63rd Legislative Assembly was highlighted by the passage of historic tax relief; landmark reforms in the way North Dakota funds education, unprecedented funding for statewide infrastructure improvements; conservation enhancements and meaningful support for public safety and quality-of-life enhancements.
“Our strong economy allows us to provide even more tax relief while investing in important priorities for growth,” Dalrymple said. “This is a time of incredible progress in North Dakota and we have a great responsibility to continue making meaningful investments while maintaining healthy reserves so that we can sustain our progress for generations to come.”
STATEWIDE INFRASTRUCTURE IMPROVEMENTS
Leading into the 2011 legislative session, Dalrymple initiated the most ambitious infrastructure improvement program in state history. The 2013 Legislature worked with Dalrymple to continue the program by once again providing record investments in highway improvements, county and township road upgrades, water supply systems, flood protection projects and many other infrastructure enhancements throughout the state. These statewide investments are critical because our highways and other infrastructure support North Dakota’s continued economic growth and quality of life.
Highways, Roads and Other Transportation Improvements
The Legislature appropriated about $2.3 billion to rebuild and repair state highways, county and township roads, bypass routes and other infrastructure upgrades in every region of the state. The funding includes:
- About $1.64 billion for highway improvement projects throughout the state.
- $617 million to repair and rebuild county and township roads.
- Statewide grants of $15.5 million for airports.
Addressing Rapid-Growth Impacts
The Legislature has appropriated about $2.5 billion, unprecedented funding to continue addressing the needs that come with rapid growth in North Dakota’s oil-producing region. The state’s oil counties will receive record funding through an increase in their share of state oil and gas taxes, significant transportation funding and funding from various state agency budgets. Funding to help the state’s oil-producing counties manage rapid growth includes:
- About $590 million in oil and gas gross production tax allocations, an increase of more than 140 percent from the estimated allocation of $246 million in the current biennium. The funding includes:
- $314 million to counties
- $198 million to cities
- $47 million to school districts
- $31 million to townships
- More than $1.5 billion for highway improvement projects as well as county, township and city road improvements.
- $10 million from the Strategic Investment and Improvements Fund (SIIF) for critical-access hospitals.
- $10 million in SIIF funding for law enforcement grants and projects.
- $240 million from the state’s Oil and Gas Impact Grant Fund to target areas of greatest need in western North Dakota. This represents an increase of $140 million over the current biennium. The grant program includes:
- $14 million for the hub cities of Williston, Minot and Dickinson
- $60 million for grants to airport authorities
- $5 million for counties impacted by oil and gas development
- $4 million for higher education grants
- $3.5 million for fire protection districts
- $7 million for emergency medical services
- $25 million for schools
- $135.5 million in undesignated funding for competitive grants to address the region’s most critical needs in schools and other political subdivisions
Flood Control and Water Supply Projects
The Legislature appropriated $515 million from the Resources Trust Fund for permanent flood control projects and water supply projects that will serve communities throughout the state. The funding package includes:
- $40 million for the Western Area Water Supply (WAWS) project as part of the Williston Water Treatment Plant expansion and an additional $79 million to expand fresh water supply into rural areas and communities of western North Dakota. During the 2011 and 2013 legislative sessions, the state has provided nearly $230 million for WAWS development.
- $79 million for the Southwest Water Pipeline project in western North Dakota. The funding will provide for the construction of transmission lines in Dunn and Oliver counties; to upgrade Dickinson’s water treatment plant and to extend rural water supplies.
- $96 million to expand water supply service in areas across the state, including: $14 million for the Northwest Area Water Supply; $11 million for the Red River Valley Water Supply as well as several rural water supply expansions, treatment plant upgrades and other water supply improvements.
- $33 million for general water management projects throughout the state, including dam safety, repairs and construction and Devils Lake downstream mitigation.
- $61 million toward permanent flood protection in Minot, including planning, design, engineering and home acquisitions.
- $100 million toward permanent flood protection in Fargo and surrounding areas.
- $21 million for flood control projects in Valley City, Lisbon and Fort Ransom, including property acquisitions as well as flood walls and levees.
- $10 million for operation of the Devils Lake flood control outlets.
LANDMARK TAX RELIEF
Dalrymple has signed into law unprecedented tax relief totaling about $1.1 billion during the 2013-2015 biennium. The Legislature followed Dalrymple’s recommendation to provide historic property tax relief by reforming the way North Dakota funds K-12 education.
Since 2009, Dalrymple has worked with legislators to reduce taxes by about nearly $2.4 billion. The 2013-2015 tax relief package is made up of:
- More than $850 million in property tax relief, including $656 million provided through a new K-12 school funding formula that shifts the largest share of education costs from school districts to the state. $200 million in property tax will be provided through a state-paid tax credit.
- $200 million in individual income tax relief across all tax brackets. Combined with tax relief provided since 2009, North Dakotans will realize a 42 percent reduction in their income tax.
- $50 million in corporate income tax relief.
- Dalrymple recommended and the Legislature approved a significant expansion of the state’s homestead tax credit to make more North Dakotans eligible for this property tax reduction. The Legislature raised the maximum income limit and the maximum asset limit, including the value of taxpayers’ homes. Tax relief provided through this program to senior citizens who live on fixed incomes more than doubles from $8.8 million to $20 million.
- Dalrymple also signed into law an expansion of the homestead tax credit for disabled veterans. The change will expand the tax credit program for disabled veterans from $4.2 million to $7.7 million, an 83 percent increase.
Following Dalrymple’s recommendation, the Legislature approved the most significant reform in K-12 funding in state history. The Legislature approved the governor’s proposal to establish a new, integrated formula to deliver both property tax relief and strong funding for schools so that all students receive the educational resources they need to succeed.
The Legislature approved $1.7 billion to fund schools and reduce the local cost for school funding. The appropriation represents an increase of $477 million compared to 2011-2013 funding. The new funding formula is sustainable and will result in most school districts needing to levy no more than about 70 mills to cover the local share of school funding. For the average school district, this represents about a 45 percent reduction in local property tax rates.
The Legislature also approved the governor’s recommendation to provide grants to school districts challenged by rapidly growing enrollments. The Legislature provided $13.6 million for school districts that experienced enrollment growth of four percent or more during the previous year. Additionally, the Legislature approved the governor’s proposal to increase school transportation funding by more than 10 percent, from $48.5 million to $53.5 million, to help districts meet the rising costs of providing student transportation services.
The Legislature also supported Dalrymple’s recommendation to fund North Dakota’s colleges and universities under a new funding model. Rather than funding campuses based on initial student enrollments, the Legislature agreed that North Dakota’s 11 campuses should receive funding based on student credit hours completed. The new funding formula is more transparent and is based on the actual costs of education.
With the new funding formula in place, the Legislature appropriated $902.3 million to fund the state’s colleges and universities. The funding package includes:
- $29 million for the North Dakota Higher Education Challenge matching grant fund. The program is designed to stimulate the spirit of philanthropy for our colleges and universities. Every $2 in eligible, private donations will be matched with $1 in state funding.
- A continued appropriation of $10 million for merit-based scholarships.
- An additional $2.2 million for student needs-based scholarships, increasing the program’s total funding to $21.2 million.
- $16.5 million to move towards equalizing campus funding levels based on student credit hours within each institutional tier.
- A $39.5 million adjustment for salary and benefit increases, as well as operating expense and utility inflation.
- $2.5 million to enhance campus safety and security.
- A $5 million performance fund for campuses that meet specified goals or other performance measures determined by the State Board for Higher Education.
- $5 million to assist Minot State University’s recovery from the 2011 Mouse River flood.
- Increased funding of $2.5 million to offset the impact of oil development at Williston State College.
- $7.4 million for a Healthcare Workforce Initiative to expand class sizes and the number of available residency positions at the UND School of Medicine and Health Sciences.
- $178.5 million in capital improvement projects.
Creating jobs and opportunities is our over-arching strategy for economic growth. The Legislative Assembly has supported Dalrymple’s initiatives for continued job creation and economic growth in several ways:
- $12 million to fund Research North Dakota (RND), which will grow and diversify the state’s economy by commercializing technologies, including biotechnology.
- $6 million in workforce development funds to educate and train North Dakotans for diversifying careers, and to promote industry-college partnerships.
- About $2 million to support Innovate North Dakota and grants to entrepreneurial centers that assist startup businesses.
- $1.5 million to expand the Operation Intern program which provides internships, cooperative work experiences and apprenticeship positions with North Dakota employers.
- $5 million to develop a UAS Airspace Integration Test Site in North Dakota. $4 million in funding is contingent on FAA test site designation.
- $1.5 million for base retention grants in Minot, Grand Forks, and Fargo.
- An additional $1.5 million for tourism marketing.
- $750,000 for tourism infrastructure grants.
- $5 million for workforce training grants at tribal community colleges.
Fostering Responsible Energy Development
- About $3.5 million for 20 additional staff at the Department of Mineral Resources (DMR) to assist with enhanced oversight and regulation of oil and gas development.
- About $587,000 for three additional DMR employees who will be hired and deployed to service in the oil fields once the state’s well count exceeds 15,000.
- An additional one-year tax exemption on natural gas captured at the well site. The tax exemption promotes the reduction of flaring. Oil companies can flare natural gas for one year without paying taxes and royalties on the flared gas. Companies can now extend the tax exemption another year by collecting at least 75 percent of the gas at well sites.
- Exemption of sales tax for materials used to build liquefied natural gas processing plants. The tax exemption will promote the development of natural gas processing facilities, encourage the capture and processing of North Dakota natural gas and help reduce flaring.
- $6 million in additional Oil and Gas Research funding to promote the development of value-added oil and gas processing projects and to fund studies to track and forecast changes in the energy industry workforce, housing and population.
- $3 million for the Renewable Energy Research Program.
- Development of a database of confidential pipeline locations that can be accessed by regulators and landowners
- $2 million for eight additional state Health Department employees to enhance the state’s environmental inspections of well sites and other monitoring and enforcement activities in western North Dakota’s oil fields.
- Extending sales tax exemptions for wind power generating facilities another two years, which could result in an estimated $500 million in new wind energy construction.
- Tax exemptions that would support the construction of a BNSF Railway liquid natural gas processing plant as well as tax exemptions on the sales and use of liquid natural gas for agricultural, industrial and railroad purposes.
North Dakota is building on its strong economy to help improve the quality of life of all citizens. Key measures include:
Strong Support for Public Safety
- $3.8 million for 15 additional Highway Patrol troopers.
- $3.9 million to fund 19 additional positions within the state’s judiciary, including three district court judgeships, six additional deputy clerks of court and two juvenile probation officers.
- $956,000 for six additional parole and probation officers to help manage increased caseloads and to enhance court-ordered supervision.
- $5 million to complete the first phase of a new law enforcement training center.
- Passage of tougher laws against drunk driving. North Dakota’s tougher DUI laws include tougher penalties; mandatory enrollment for repeat offenders in an intensive program to monitor and enforce sobriety and new felony offenses that include longer jail sentences for drunk drivers that cause a death or injury.
- About $2.9 million for the Attorney General’s office to fund 17 positions, including criminal investigators, forensic scientists and criminal intelligence analysts.
- $14.5 million to enhance support for fire protection districts throughout the state. The funding more than doubles the state distributions for fire-fighting equipment and training.
- $1.6 million to expand the State Radio Communications Center at Fraine Barracks and hire four radio dispatchers.
- $1.2 million for additional State Radio towers in existing service coverage gap areas.
- $1.2 million for the final phase of the statewide seamless base map project.
- $1.1 million to upgrade, maintain and repair State Radio towers, the computer-aided emergency dispatch system, and other State Radio equipment.
Health and Human Services
House Bill 1012 allocates more than $2.9 billion for the North Dakota Department of Human Services, with $1.2 billion allocated from the General Fund. This budget includes an increase of more than $93 million to take over what the federal government used to cover for the Federal Medical Assistance Percentage (FMAP), which funds Medicaid and other department programs. This bill provides valuable services to North Dakotans, especially the state’s most vulnerable citizens, such as seniors and the disabled and it provides additional funding for healthcare providers, including critical access hospitals and rural health clinics. Highlights of the legislation include:
- An investment of more than $4 million in home and community-based care services to help seniors remain in their homes. Additional funding will be available for senior meals, mileage reimbursements for Qualified Service Providers, and in-home services for seniors and others with extended care needs.
- An increase of $2.2 million for additional bed capacity for the transitional living program and long-term residential program for individuals with mental illness and chemical dependency issues.
- A wage and inflationary increase of more than $123 million for nursing home staff and other direct care providers to remain competitive in North Dakota’s growing economy and maintain a high standard of care across the state.
- An investment of $2.7 million to assure that reimbursements for critical access hospitals and rural health clinics are closer to their actual costs.
The Legislature also appropriated $184 million in state Health Department funding, including the following:
- $7.34 million for rural emergency medical services throughout the state.
- $900,000 to administer a statewide suicide prevention program.
- $2.5 million to continue universal vaccinations at local public health units.
- An additional $1 million to enhance support for the state’s local public health units.
Expanding Housing Development
One of the main challenges created by North Dakota’s thriving economy and strong population growth is the need to keep pace with the state’s housing needs. To further facilitate the development of more housing, the Legislature followed Dalrymple’s recommendation to reauthorize the Housing Incentive Fund which the governor first introduced in 2011.
The Legislature provided $20 million in state income tax credits for citizens and businesses that invest in the state Housing Incentive Fund. Developers access this source of low-interest loans to develop low- and moderate-income housing. The Legislature also appropriated $15.4 million in General Fund revenue for a direct investment in affordable housing projects.
Additionally, the Legislature provided $12 million in Flex PACE buydown funds to support residential construction. This investment is a strong incentive for builders and it will generate an estimated $125 million in private housing development. Other state support for housing includes:
- $13.5 million in additional low-interest loans for residents impacted by 2011 flooding. The Rebuilders Loan Program has already provided $41 million to help flood victims repair their homes or buy new property.
- Property tax reductions for non-profit organizations that develop housing projects for lower-income households.
- $1.5 million grant to assist Minot in managing a transitional housing program established to aid Minot and Ward County residents displaced by the 2011 Mouse River Flood.
- Expanded authority for the North Dakota Housing Finance Agency to assist in financing mortgage loans for lower-income households.
Child Care Enhancements
Access to quality child care is an essential part of our quality of life and economy. The Legislature appropriated about $10 million to assist in expanding the availability of child care throughout the state. The state’s support for child care services includes:
- $2.6 million in matching grants to assist in the establishment or expansion of child care facilities and to purchase equipment.
- An increase in the income eligibility for child care service payments to 85 percent of the median family income and a contingent $2.5 million appropriation for costs not covered by federal funds.
- $4.1 million for training, technical assistance, incentives for child care providers for workforce development, quality improvement, technical assistance, and capacity building.
- $700,000 to support providers who care for children with special needs.
- Continued funding of $200,000 for collaboration with Head Start programs.
- Continued funding of $125,000 for grants to school districts for operating early childhood programs.
- $2.7 million for child care provider resources, referral services for parents and data collection.
- Expansion of the Beginning Entrepreneur loan guarantee program to include child care facilities.
Military and Veterans
North Dakota is committed to showing its veterans and our men and women in uniform our appreciation in tangible ways:
- $600,000 to continue the Veteran’s Bonus Program.
- An additional $110,000, for a total of about $2.5 million, to enhance the North Dakota National Guard Tuition Assistance Program. The program covers tuition costs for Guard members to participate in North Dakota post-secondary education programs.
- $130,020 to coordinate the North Dakota National Guard Military Funeral Honors program.
- $83,160 for maintenance at the North Dakota Veteran’s Cemetery.
- $325,000 to assist veterans who are enrolling in North Dakota’s higher education institutions.
- $50,000 to purchase service dogs to assist veterans suffering from post-traumatic stress disorder.
- $50,000 to identify and provide assistance to North Dakota veterans who were exposed to Agent Orange during the Vietnam War.
Our ongoing work to enhance North Dakota’s quality of life must include the preservation and enhancement of our great outdoors and a continued commitment to develop our energy resources in responsible ways. Key provisions that support these commitments include the creation of the North Dakota Outdoor Heritage Fund.
The Outdoor Heritage Fund will receive as much as $30 million a biennium in oil production taxes to expand and enhance North Dakota’s opportunities for hunting, fishing and all outdoor recreation experiences. From the fund, grants will be awarded to state agencies, tribal governments, political subdivisions and non-profit organizations for the preservation and enhancement of wildlife habitat, outdoor recreation opportunities and conservation projects.
North Dakota’s farmers and agricultural businesses represent the state’s largest industry and they are critical to the continued growth of the state’s economy and our way of life. Some of the key measures approved during the legislative session include:
- $5.9 million for agronomy laboratories at the Carrington, Central Grasslands, Hettinger and Langdon Research Extension Centers.
- $1.8 million to enhance crop development and protection research efforts
- $1.2 million for research on the control of weeds and plant pathogens, as well as increase the overall research capacity at research extension centers throughout the state.
- $1.1 million for Soil Conservation Committee grants.
- Enhanced funding for the Rural Leadership North Dakota, an educational outreach program for agricultural and community leaders across rural North Dakota.
- Passed legislation for the humane treatment of animals.
- Increased funding for critical agriculture programs including mediation services for farmers and ranchers impacted by energy development as well as environment and rangeland issues.
BUILDING A RESERVE FOR THE FUTURE
The budget sets aside reserves of $2.655 billion by June 30, 2015. In addition, the state’s Legacy Fund, which cannot be accessed until 2017, will total an estimated $2.983 billion.
Budget Stabilization Fund $584 million
General Fund ending balance $ 87 million
Foundation Aid Stabilization Fund $606 million
Strategic Investment and Improvements Fund $721 million
Property Tax Relief Fund $657 million
Total $2.655 billion