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Dalrymple Delivers 2013-2015 Budget Address

Budget Strengthens State's Financial Position, Increases Tax Relief and Funds Priorities

BISMARCK, N.D. – Gov. Jack Dalrymple today released his 2013-2015 Executive Budget, a balanced plan that will leave the state financially stronger even after providing greater tax relief and historic investments in statewide infrastructure, education and other priorities.

"Never before in our state's history have we had a structural balance to our General Fund budget as strong as what we are proposing today," Dalrymple said. "We have worked hard for our prosperity and now it's time to put our prosperity to work for us."

Dalrymple's Executive Budget includes:

  • Unprecedented tax relief for the people of North Dakota. The Executive Budget includes $500 million in additional tax reductions during the 2013-2015 biennium. Including Dalrymple's latest tax relief plan, North Dakota taxpayers will have received more than $2 billion in tax savings since 2009.
  • An historic level of one-time investments in transportation infrastructure, water control and water supply projects and other infrastructure improvements across the state. Dalrymple's budget also increases funding for the state's oil-producing counties, for law enforcement, health and safety, housing and other quality-of-life enhancements.
  • Dalrymple's budget leaves the state in a stronger financial position at the end of the 2013-15 biennium, even after accounting for tax relief, unprecedented investments in education, and statewide infrastructure upgrades and other funding enhancements.

"This budget opens a new chapter in our state's history, a time of incredible growth and expansion," Dalrymple said.

Sound Fiscal Management

Revenues Exceed Expenditures

Ongoing Expenditures

The Executive Budget calls for General Fund ongoing revenues during the 2013-2015 biennium to total about $4.8 billion while ongoing expenditures total $3.8 billion.

After setting aside funds for property tax relief, urgent infrastructure needs and transfers to the Budget Stabilization Fund, the General Fund cash balance will total about $69 million on June 30, the beginning of the 2013-2015 biennium. The General Fund's balance will grow to about $81 million by 2015. (Chart 1)  Ongoing General Fund spending is limited to $300 million of oil and gas tax revenues as required by statute. All other oil tax revenues are dedicated for special purposes as required by the state constitution or state statute. (Chart 2)

One-time Expenditures

Our budget proposal includes $991 million in one-time General Fund expenditures for road and highway projects as well as educational infrastructure and enhancements for emergency services, law enforcement and agricultural research.

Reserves for the Future

By the end of the current biennium, reserves from the ending fund balance, the Budget Stabilization Fund, the Foundation Aid Stabilization Fund and the Strategic Investment and Improvements Fund will total $1.56 billion. The reserve funds will grow to $2.4 billion by June 30, 2015 (Chart 3). In the same time period, the balance of the Legacy Fund, which is not available until 2017, will increase from $1.2 billion to $3 billion.

Unprecidented Tax Relief

With ongoing and one-time expenditures accounted for and reserves secured, Dalrymple is recommending additional tax relief for the men and women of North Dakota. (Chart 4)

In the last biennium, we reduced property taxes by $342 million through a reduction of about 75 mills in school district levies. We recommend providing more tax relief by lowering property tax in an average school district by an additional 60 mills. Together, these mill levy reductions will keep $714 million in the pockets of North Dakota property owners.   Furthermore, we are proposing that the total property tax relief for the upcoming biennium be made a permanent part of the school funding formula.

The Executive Budget also provides $100 million in individual income tax reductions in addition to the $210 million in reductions provided during the last two legislative sessions.

We also propose expanding the Homestead Tax Credit to benefit more senior citizens and the disabled. By increasing the allowable income threshold, disregarding social security income and eliminating the asset test, we can save qualified property owners an additional $20 million in property taxes during the 2013-15 biennium.

Dalrymple's tax relief plan also provides an additional $25 million in corporate income tax relief to attract and retain businesses. This reduction is in addition to the $35 million in corporate tax relief provided during the last two legislative sessions.

Taking into account tax reductions since 2009, our taxpaying citizens will receive more than $2.1 billion in tax savings by the end of the 2013-2015 biennium. It is important that the hard-working men and women of North Dakota see a substantial share of our economic gains reflected in tax savings.

Statewide Infrastructure Needs

Economic growth cannot be sustained without strong investments in infrastructure and our budget addresses infrastructure needs in every region of the state.

Our budget recommends $2.5 billion for statewide transportation upgrades alone. As part of that commitment, we recommend providing more than $1 billion for one-time infrastructure investments over and above regular funding for the North Dakota Department of Transportation. This funding source would provide $390 million for extraordinary highway construction and maintenance projects; $300 million to convert two-lane highways into four-lane highways, beginning with U.S. Highway 85 between Watford City and Williston; and $325 million for interchanges, truck bypass routes and other large transportation projects.

Infrastructure Support for Western North Dakota

Oil and gas development is creating great benefits and opportunities for western North Dakota and the entire state. We must make an even greater commitment to help meet the challenges created by rapid growth in our oil-producing counties. (Chart 5)

Our budget recommends dedicating another $142 million in one-time funding for counties and townships that need assistance repairing roads damaged by extraordinary truck traffic. We also propose increasing funding for the Oil and Gas Impact Grant Fund to $214 million. The fund enables political subdivisions to address a wide range of needs including infrastructure development that supports residential construction as well as enhancements for law enforcement and emergency services.

We also propose a change to the oil and gas production tax formula to provide the region's political subdivisions with a steady, reliable income stream to budget and better address the impacts from rapid growth. Our budget recommends changing the formula to more than double the local revenue from $247 million to $521 million during the upcoming biennium. Our proposal calls for oil counties to receive 100 percent of the first $5 million in oil revenue each year. Then, instead of counties' revenue share declining to 10 percent, we recommend they receive a constant 25 percent revenue share without any further caps or reductions. The formula change should remain in place until the region's revenue demands subside.

Infrastructure Support for Non-Oil Counties

Although the infrastructure needs of western North Dakota are great, no less important are the critical needs for road improvements outside our oil-producing region. Because we have targeted funding for western North Dakota, the remainder of the Highway Fund totaling $598 million is essentially available for projects in other areas of the state. In addition, our budget provides $100 million for non-oil counties, cities and townships.

Flood Prevention and Water Projects

Our investments in statewide infrastructure upgrades include continuing our important work to help meet the critical needs for flood protection and water supply projects.

For flood protection in the Fargo area, we support an additional $102 million from the Resources Trust Fund while Fargo-area officials work to find a permanent solution to Red River Flooding. While the Souris River Basin is studied for a permanent floodway, we support committing about $60 million this biennium to assist with further protection and home acquisitions. We also support committing $21 million to advance flood protection projects in Valley City, Fort Ransom and Lisbon.

In addition, the state remains committed to helping fund improvements to Fargo's water treatment plant, as well as regional and rural water supply projects including Western Area Water Supply, the Northwest Area Water Supply and the Southwest Pipeline.

Preparing our Youth for Tomorrow

K-12 Education

Our budget recommends providing an increase of $549 million in K-12 education funding. (Chart 6)  Of the total increase, $372 million will provide for local property tax relief. Our recommendation fully integrates property tax relief with school funding.

The formula is sustainable well into the future and will result in most school districts needing to levy no more than 60 mills to cover the local share of school funding. Funding increases for K-12 education include:

  • $53.5 million to cover the added costs of increased student enrollments across the state.
  • $73.6 million for increased per-student payments.
  • $27.7 million for costs to continue the current level of state aid payments.
  • $17 million for statewide rapid enrollment grants.
  • $5 million to help cover the increased costs of student transportation.

Higher Education

Our budget proposal for higher education is based on a new model for distributing state funds to North Dakota's 11 campuses. The new model would fund campuses based on the courses that students complete, rather than class enrollments. The formula, based on student credit hours completed, takes into account the varying costs of educational instruction, including advanced levels of study.

We are recommending an increase of $89 million in funding for higher education, with $12 million required to cover the increased costs to continue current operations. We also recommend providing $30 million to create Education Challenge, a matching-grant fund 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.

The Executive Budget also includes $21 million to transition to the new funding formula and $6 million to increase the state's merit-based scholarship program and needs-based scholarship program. In addition, our budget provides one-time funding for capital improvements that include, but are not limited to the following:

  • $68 million to expand and improve the University of North Dakota School of Medicine and Health Sciences.
  • $6 million to expand the Erlandson Technical Center at Lake Region State College.
  • $29 million for a new building dedicated to the fields of science, technology, engineering and math at North Dakota State University.
  • $12 million for a complete renovation of the UND School of Law.
  • $13.3 million to build a new library/instructional center at Bismarck State College.
  • $12.2 million to renovate Stevens Hall at Williston State College.
  • $8.5 million to renovate Old Main at North Dakota State College of Science.

Economic Development

North Dakota's economic development efforts have evolved from a strict emphasis on job creation to an expanded mission that includes workforce development and quality-of-life considerations.

Our budget includes $12 million in matching grants for a new job creation initiative called Research ND. Businesses will work with our research universities to commercialize new technologies. Unlike its predecessor, the Centers of Excellence program, these state funds will be matched only with private-sector cash investments.

In our budget, we also are recommending that the Department of Commerce administer a $5-million grant program to assist in the development of new and expanding childcare facilities in communities across the state.

Quality of Life and Taking Care of People

As we focus on competitiveness and the details of building a strong economy, we must not lose sight of the fact that our ultimate objective is a higher standard of living and a better quality of life for all North Dakotans.

Law Enforcement and Public Safety

We are committed to keeping North Dakota one of the safest states in the nation. That's why our budget includes significant funding increases for law enforcement and other public safety enhancements. Our budget includes $3.8 million in additional funding for 15 additional Highway Patrol troopers and $6.6 million to complete the first phase of a new law enforcement training center.

Additionally, our budget includes $4 million for 23 new positions within the Industrial Commission's Oil and Gas Division. These additional positions include petroleum engineers and field inspectors to further ensure that safety and environmental regulations are followed at drilling and well sites. Our budget also includes funding for additional staff within the Department of Health for greater protections against environmental hazards and public health threats.

Our commitment to providing the people of North Dakota with quality public safety includes additional funding to enhance state radio and to increase state grants for fire districts and emergency management services throughout the state.

We are also recommending requests from the Attorney General's Office and the Judicial Branch to fund more positions that will strengthen the Bureau of Criminal Investigation and our district courts.

Expanding Housing Development

One of the main challenges created by North Dakota's strong economy and population growth is the challenge of keeping pace with the state's housing needs. In 2011 we utilized several tools that are producing results.

To facilitate greater housing development in our growing communities, our budget recommends increasing the state's Housing Incentive Fund to allow for $20 million in state income tax credits. Citizens and businesses that invest in the fund receive a state income tax break of equal value. Developers access this source of low-interest loans in exchange for providing housing for low- and moderate-income residents. Our budget also recommends transferring $30 million from the General Fund for a direct investment in the Housing Incentive Fund to accelerate the availability of funds for housing development.

In addition, our budget recommends providing an additional $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.

Health and Human Services

During the 2013-2015 biennium, the state will receive $93 million less in federal funding for Medicaid reimbursements and other medical assistance coverage. This reduction in federal funding is the result of North Dakota's continued growth in per capita income. We recommend making up the loss with state funds rather than cutting benefits to those in need of healthcare.

We also recommend providing an additional $1 million to enhance guardianship services that help ensure the protection and dignity of North Dakota's growing senior population and our most vulnerable citizens. Our budget also includes additional funding to offset increased costs at our rural health clinics and critical access hospitals; to meet increased needs for chemical dependency treatment and mental illness; and to enhance programs that deliver meals to senior citizens and allow them to remain in their homes.

Long-term Care and other Healthcare Providers

Our budget also provides nursing homes and other healthcare providers, as well as providers serving people with developmental disabilities and mental illness, with a 4-percent inflationary increase for each year of the biennium. Additionally, we funded a wage increase of 50 cents an hour for frontline caregivers. We must help these providers address rising costs and maintain an outstanding quality of care.

Military and Veterans

For our veterans and our men and women in uniform our deepest gratitude is not enough. We must also show them our appreciation in tangible ways.

In past legislative sessions, we have established the Veteran's Bonus program which provides bonus pay for overseas and domestic deployments. We established a tuition waiver program and funding for counselors to assist our soldiers and their families, and we've built and enhanced funding for the North Dakota Veterans Home in Lisbon. Last year, we added a new outreach center for veterans and service men and women in Fargo, and we continue to support our veterans of all wars in their senior years. Our budget maintains full funding for all of these programs and enhances veterans' support despite reductions in federal funding. Whether fighting floods here in North Dakota or serving overseas, the North Dakota National Guard and all of our branches of military service make possible the way of life we enjoy today

Preserving North Dakota's Outdoors

The outdoor experience and the tradition of hunting in North Dakota are also core elements in our quality of life. The challenges created by a growing population and expanding commercial development include greater risks to our outdoors, and that's why we are including in our budget a proposal to establish a permanent conservation fund to enhance the opportunities for hunting and all outdoor recreation experiences.

Our budget calls for committing a portion of funds generated by oil production taxes to a newly created conservation fund, with an annual funding cap of $10 million. We propose creating an advisory committee made up of a diverse group of stakeholders to administer a grant program under the direction of the Industrial Commission. The committee will award grants to state agencies and non-profit groups to benefit statewide conservation practices, wildlife habitat, parks, and outdoor recreation.

Public Employee Salaries and Health Insurance

As directed by the 62nd Legislature, our recommendation for state employee compensation is not presented as a statewide percentage increase, but rather is based on dollar amounts determined necessary for competitive compensation. The appropriation allocations are based on employees' performance and their relative position in the market.

Employees who meet set performance standards will be eligible for a performance increase of 3 percent each year and those employees exceeding performance standards are eligible for an increase of up to 5 percent. In addition, employees whose current compensation is farthest from market are eligible to receive an additional increase between 1 percent and 4 percent, depending on their position in the salary range. This compensation factor is intended to alleviate compression created by our new salary ranges. The general fund cost of this salary package is $50.8 million.

The compensation package continues full health insurance for state employees and their families, and recommends an increase in contributions to the retirement system of 2 percent each year of the biennium with the cost evenly split between employees and the state.

We have also funded a 4-percent annual salary increase with pension contributions and full health insurance for employees of the university system.

Associated Documents: 

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