The North Dakota Legislature and the governor should have an easy time in the upcoming session. The most recent data we have show that revenue through October is almost 1 percent better than projected in May 2009.
Being serious, when looking at the tax categories more closely, we can see the difficulties in making projections by category. For instance (and I would refer readers to the Office of Management and Budget table in my column of two weeks ago), sales taxes are almost 4 percent above projection through the end of October while individual and corporate income taxes are almost 6 percent and 16 percent less than projections.
This happened when North Dakota's income growth is supposed to be among the best in the nation.
In the major categories, the motor vehicle excise tax made up almost exactly for the shortfall in the corporate income tax. That could be in part because farmers had such a good year and they were updating their pickups and trucks, and because many of the oil-patch workers are buying vehicles.
In the end, my conservative nature makes me think that had North Dakota lacked such a booming economy these past two years -- especially in all energy categories and farming --we could have been in a position similar to the one Minnesota's in today.
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Take away the good times, and how much less would corporate income, individual income and sales tax collections have been?
So, what kind of a budget should we hope the North Dakota Legislature would appropriate for the 2011-2013 biennium? We need to look not only at Minnesota but also at South Dakota.
South Dakota is a state more like us, and today it has a budget that is in almost as good a condition as North Dakota's -- plus, South Dakota has done that without an oil boom. I hope our governor and Legislature are taking a good look at South Dakota.
There are some things we need to understand as the budget is built. In the first place, as Gov. Jack Dalrymple has pointed out, half of the increase he has had to put into the proposed budget is because North Dakota was careful in its spending and taxation during the current biennium, and therefore the federal government has cut the amount of social services spending it is forwarding to the state.
But we still must spend at that earlier level, which means the state must make up from our own treasury for the drop in federal money.
In other words, we are being punished for being careful and for having a good economy. Other states, including Minnesota, will continue to get federal help at the same level as before because of their shortfalls.
Of course, there was a very significant increase in state spending over Gov. John Hoeven's 10 years. If we look at changes in the budget, we easily can see that it has been social service spending -- much of it mandated by the federal government -- that has driven the increase.
Also, another large share of the increase comes from shifting the financing of local spending from local property taxes to state taxes. Most of that shift from local to state spending occurred in elementary and secondary education funding, and most of that was a substantial increase in the amount of money allocated to teachers' salaries.
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Many say we still have a surplus, but unfortunately, the surplus actually is all spoken for. Much of it will be used to make up for the drop in federal payments in the social service category. Much will go to helping the oil producing counties with roadwork, bridgework and sewer and water requirements. Much will go to building an answer to the Devils Lake flooding problem.
We will watch this closely as the Legislature begins its proceedings in a couple of weeks.
It all seemed so easy.
Reach Kingsbury at kae@invisimax.com .
