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GOP lawmakers suggest deeper North Dakota budget cuts before tapping reserves

BISMARCK – Two high-ranking Republican lawmakers called Wednesday for deeper cuts to state agency budgets before tapping reserve funds to compensate for a revenue slide that’s already $152 million below forecast just five months into the biennium.

Office of Management and Budget Director Pam Sharp briefed the Legislature’s Budget Section on her decision last week to request a new revenue forecast from Moody’s Analytics, which should be ready by mid- to late January.

If the new forecast projects that state revenues will be 97.5 percent or less of what was projected during the legislative session last spring, it will trigger automatic budget cuts of up to 2.5 percent, or about $105 million, for most state agencies.

State law allows the governor to use the $572 million Budget Stabilization Fund to cover any shortfall beyond the 2.5 percent.

But House Majority Leader Al Carlson, R-Fargo, said the law doesn’t limit agency budget cuts to 2.5 percent. He suggested requiring agencies to cut 3 percent or 4 percent to weather the revenue slump brought on by low oil and farm commodity prices, rather than using the stabilization fund.

Carlson said agencies have been asked to submit 95-percent budget requests in leaner years, and he noted the Legislature has increased budgets significantly in the last decade.

“Why all of a sudden fall back to that (fund) right away when you could really look at these budgets and say, ‘We could handle 5 percent statewide in these agencies and make it work,’ ” he said.

Sharp said her office falls back to the 2.5 percent because that seemed to be the legislative intent when the stabilization fund was set up.

The $152 million shortfall from July through November already has taken a big bite out of the roughly $340 million cushion in the 2015-17 budget. That cushion came from a $211 million ending fund balance that lawmakers built into the budget and $130 million in turn-back from agencies and higher revenues in April, May and June.

Sharp said the new forecast would have to show a $400 million shortfall to trigger budget cuts of 1 to 2 percent. A $500 million shortfall would require both budget cuts and a $20 million to $30 million transfer from the stabilization fund, if the budget cuts were 2.5 percent, she said.

Rep. Eliot Glassheim, D-Grand Forks, said such a shortfall would still leave a lot in the stabilization fund for the next biennium. But he noted that monthly revenues have averaged $30 million below forecast so far, and if the trend continues, the total shortfall would be $720 million by July 2017. He suggested one-time building projects and unfilled staff positions as the first places to cut.

The chairman of the House Appropriations Committee, Rep. Jeff Delzer, R-Underwood, said he would hope agencies would reduce their ongoing expenses rather than just one-time expenses, and he supported the idea of 5 percent budget cuts.

Carlson said that when agencies have been allowed to decide where to trim their budgets in the past, “They picked programs that were the most devastating to people so that there would be a large outcry so that would not be done.

“So they need sharpen their pencil and be put on notice that this means make your operations more efficient,” he said.

Mike Nowatzki

Mike Nowatzki reports for Forum News Service. He can be reached at (701) 255-5607.