A new state budget forecast could mean a budget allotment – an across-the-board budget cut for state agencies.
It’s due, in part, to the slowdown in the oil industry, which has slowed the collection of sales taxes.
It hearkens back to 1982 – when oil prices plummeted, and budgets were cut.
“The Legislature learned some lessons back then about the cyclical nature of budgets,” said Senate Appropriations Committee chairman Ray Holmberg (R-Grand Forks0. H was also in the Legislature during that late 70s - early 80s boom.
It happened just after North Dakota voters passed Measure Six – which raised taxes on oil from 5 percent to 11 ½ percent. Former North Dakota House Majority Leader Earl Strinden (R-Grand Forks) said before Democratic Governor Arthur Link left office, he had recommended a significant state budget increase – from $640 million to just over $1 billion. And he says that’s what lawmakers and new Governor Allen Olson had to wrestle with in the 1981 Legislative session.
“We were successful in reducing that budget to $970 million," Strinden said. "But it was still a significant increase over the previous biennium.”
Then, when oil prices tanked in 1982, Olson was forced to use his allotment powers to cut budgets across the board. Strinden says local governments in western North Dakota were also hit pretty hard.
“We weren’t able to help out in Williston, where they put in water and sewer lines in an anticipated growth area," Strinden said. "They found they wouldn’t be able to fill that area. So they were left holding the cost.”
Holmberg says K-12 education funding lost $45 million. And he says schools actually suffered for some time.
“For a number of years, the foundation aid program was not getting the money that the Legislature had promised, nor that the school districts had budgeted for,” Holmberg said.
Holmberg says the Legislature eventually created – and voters approved – a rainy day fund, called the “Foundation Aid Stabilization Fund.”
“Meaning that – if budgets go south in the future, the schools will get the money that they were promised," Holmberg said. "Remember, we have a two year budget, and a school has to budget for two years.”
Holmberg says K-12 funding is politically very sensitive. And he says another issue that has become sensitive is property tax relief. He says some have worried that property tax relief might be part of a budget allotment.
“Last session, the Legislature folded the basic property tax relief program into the foundation aid program," said Holmberg. "We give the money to school districts to hold down property tax.”
Holmberg says that means property tax relief is protected by the foundation aid stabilization fund.
Strinden says he doesn’t believe the current downturn in the oil industry will be as bad as it was in the early 1980s. And he says the Legislature has done a lot of work in setting up various rainy day funds, and using direct oil tax revenue for one-time spending, instead of ongoing expenses.
“I give high grades to the Legislature for the way they have structured this to try to protect the state of North Dakota from a dramatic impact on services, and for the political subdivisions that rely on some of this revenue," said Strinden. "The Legislature has acted in a very responsible manner. I know they have.”
