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North Dakota state agency leaders look ahead to painful cuts in coming budget

State Treasurer Kelly Schmidt, pictured in 2015, says nothing is off the table as she considers her office's budget. (TRIBUNE FILE PHOTO)

BISMARCK -- North Dakota state agency heads say there will be some pain in crafting 2017-19 budgets, but the exercise will allow state government to settle into a new normal following several years of unprecedented growth.

Earlier this month, Gov. Jack Dalrymple called on state agency heads to craft budgets for the 2017-19 biennium at 90 percent of approved ongoing spending for the current biennium. It’s the first time since 2002 budget guidelines requiring cuts in state agency budgets were issued.

Office of Management and Budget Director Pam Sharp said, in her more than 13 years in her role, she’s never experienced a budget planning period with cuts of this magnitude.

“I think we just need to get ourselves back to a new normal. They (agencies) just need to reevaluate what their service level has to be,” said Sharp, adding her office dealt with the first round of cuts by keeping two vacant positions open and cutting operational expenses.

For the 2017-19 budget, those vacant positions will be eliminated and other positions will be reviewed. Operations will see further cuts in her office.

“For the smaller agencies, it’s going to be harder. They’ll have to look at staff,” Sharp said.

The guidelines come after agencies funded by general fund dollars earlier this year were subjected to 4.05 percent in cuts to help fill a projected $1.074 billion shortfall for the current biennium. A large portion of the shortfall stemmed from declining sales tax revenues, much of which is tied to energy production in the western part of the state.

Dalrymple singled out the North Dakota Department of Corrections and Rehabilitation as well as the Department of Human Services as two agencies that won’t be subject to the strict 10 percent cuts. Both agencies will work with the OMB to determine what cuts can be made without hampering services.

Sharp said, for those agencies, it will be an extremely tough balancing act between services and savings. Federal funding is a critical component for both agencies, according to Sharp, who expects the two agencies to receive extensions beyond the July 15 deadline for their budgets.

OMB had an approved 2015-17 budget of $36.3 million and 122.5 staff.

Michelle Linster, public information officer for DOCR, said the agency declined to discuss how it may address budget cuts at this time.

“It’s just too early to say ‘this is what we’re going to do,’” Linster said.

Tax Commissioner Ryan Rauschenberger said his agency is similar in size to OMB, with appropriations for 136 staff and a $58.8 million budget.

“We’re focusing on the operations side to find as much savings as possible,” Rauschenberger said.

The agency budget is about 30 percent operations, mainly due to a large amount of mailings and literature produced. He said the budget cuts could provide an opportunity to shift toward electronic mailings.

Like OMB, Rauschenberger said vacant staff positions could be eliminated as well.

“We really will have to tighten our belts. It isn’t something to be taken lightly,” Rauschenberger said.

State Auditor Robert R. Peterson agreed.

“It’s not going to be achievable without cutting people. It’s not going to be less than one or two people,” Peterson said of his agency.

The state auditor’s office had an approved 2015-17 budget of about $10.5 million and nearly 60 staff, with six new staff approved for auditors for a higher education audit division.

Peterson said only four of the six positions have been filled. To achieve the previous cuts the two open spots went unfilled and operating expenses were cut.

He said, if the Legislature approves the 10 percent cuts, staff reductions are inevitable; his office has little wiggle room since nearly all of his budget is staff and wages.

“It is what it is. We’ll put together the best budget we can,” Peterson said.

Another small agency is the office of state treasurer, with a staff of eight and a 2015-17 budget of $252 million; of its budget, $250 million is funding for the 12 percent state-paid property tax credits to residents.

“Nothing’s off the table,” State Treasurer Kelly Schmidt said.

Like the auditor’s office, her agency is primarily staff and wages.

“We have definitely not made any decisions at this time,” Schmidt said. “It should not affect the services that we provide.”

Schmidt said her office budget has only grown about 1 percent annually during her tenure.

“Any time that we have to look at efficiencies, it’s an opportunity for us to dig down and evaluate,” Schmidt said.

Budget guidelines

  • Agencies must submit budgets at 90 percent of ongoing spending of their 2015-17 budgets.
  • Exceptions will be made for the North Dakota Department of Corrections and Rehabilitation and Department of Human Services.
  • K-12 state aid funding won’t be impacted.
  • Non-general funded agencies not bound to guidelines but must submit budgets with cuts.
  • Traditional Medicaid won’t be impacted beyond cuts made earlier this year.
  • Programs, staff to be evaluated.
  • Staff pay will be dealt with separately.
  • 2015-17 budget was a record $14.4 billion budget with just over $6 billion in general fund expenditures.

Past guidelines

  • 2014: Dalrymple called for a hold-even budget as well as optional budgets for staffing.
  • 2012 Dalrymple called for a hold-even budget but also asked for optional budgets with 3 percent cuts in case savings were needed.

Timeline for 2017-19 executive budget

  • July 15: Deadline for budget requests from agencies; extensions are granted on case-by-case basis.
  •  July to August: Updated revenue forecast completed; also to include preliminary 2017-19 forecast
  •  August to mid-October: Office of Management and Budget meets with each agency on budgets.
  • November: Executive revenue forecast completed.
  •  Dec. 7: Governor’s executive budget delivered to joint meeting of Legislature during its three-day organizational session

Source: North Dakota Office of Management and Budget

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