BISMARCK – Wednesday marks the deadline for submitting the largest budget cuts dollar-wise for state agencies in North Dakota history, and more than a dozen agencies had already submitted theirs as of Friday.
Among them was the North Dakota Council on the Arts, which is handling its 4.05 percent budget cut by eliminating about $70,000 in grants that otherwise would go to local symphonies, theater groups, arts councils, schools, individual artists and others.
“It’s kind of sad that we’re doing it that way, because we would prefer that we don’t have to cut our grant programs, but our operating budgets are pretty lean,” Executive Director Beth Klingenstein said, noting the agency has only five full-time employees.
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State lawmakers increased the agency’s grant funding by $125,000 for the 2015-17 budget cycle, so it will still award more grant dollars than it did in the previous biennium, Klingenstein said.
“It’s just going to mean we’re going to have to reach a few less people than we had planned,” she said.
Following are answers to some common questions about the budget cuts.
How did we get here?
As North Dakota’s population and economy grew with the oil boom, so did government spending. The state’s general fund budget has more than tripled in the past decade, from just under $2 billion in 2005-07 to $6.03 billion for the current biennium that began July 1.
A sharp drop in crude oil prices that started in late 2014 and the accompanying decline in drilling activity, as well as low farm commodity prices, have dragged down sales tax and income tax revenues far greater than predicted in the Moody’s Analytics forecast that lawmakers used to set the budget last spring.
The result, outlined in an updated revenue forecast released Feb. 1, is a projected $1.07 billion shortfall by July 2017.
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Because the forecast predicts revenues will be at least 2.5 percent short of the previous forecast, state law gives Gov. Jack Dalrymple access to the Budget Stabilization Fund and triggers across-the-board budget cuts known as an allotment.
Has this been done before?
Yes, most recently in 2002, when then-Gov. John Hoeven ordered a 1.05 percent cut, which came out to about $18.3 million. Another $18.7 million was transferred from the Bank of North Dakota to cover the $37 million revenue shortfall that followed the dot-com bust and Sept. 11, 2001, terror attacks.
Former Gov. George Sinner ordered a 0.36 percent allotment in 1991 that resulted in $4.3 million in budget cuts.
There also were three budget reductions in the 1980s under Sinner, with two of those involving cuts related to tax referrals.
But the current $245 million allotment is the largest dollar-wise in state history, OMB Director Pam Sharp said.
Agency heads were meeting with Dalrymple all this week.
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“He wants to understand exactly what they’re proposing, what the impacts will be,” Sharp said.
How much is being cut from agencies?
Dalrymple has ordered agencies that receive general fund dollars to cut their budgets by 4.05 percent, or nearly $245 million.
He also will transfer about $498 million to the general fund from the stabilization fund, leaving the latter with a balance of about $75 million. The shortfall also will drain the nearly $332 million ending balance that was built into the budget.
Agencies that don’t receive general fund dollars aren’t required to make the budget cuts, including the Game and Fish Department, Workforce Safety & Insurance and the state-owned Bank of North Dakota.
By agency, the biggest budget cut falls on the Department of Public Instruction’s state aid to school districts, at about $72 million. However, a transfer from the $656 million Foundation Aid Stabilization Fund established by voters in 1994 will offset that cut and “hold harmless” the state aid, though DPI will still have to cut almost $2 million in administration.
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Where are they cutting?
Among the 72 other state agencies, the Department of Human Services must cut roughly $54 million, the Department of Transportation $26.6 million, the Department of Corrections and Rehabilitation $8.7 million and the Department of Health nearly $2.1 million.
All four agencies declined to comment Friday on where the cuts will occur until their plans are submitted Wednesday to the Office of Management and Budget.
Parks and Recreation Department Director Mark Zimmerman said his agency’s $1.35 million in cuts were still being finalized Friday, but they include scrapping a $1 million project to develop the new Baypoint campground at Lake Sakakawea State Park. The agency also will delay purchases of some park maintenance equipment and cut back on travel expenses, he said.
The State Auditor’s Office, whose budget is 89 percent salaries, is dealing with the bulk of its cut by slashing $405,000 from salaries and wages, primarily by not filling two of the six new auditor positions authorized by the Legislature to oversee the North Dakota University System, said Donald LaFleur, who prepares and manages the office’s budget.
The office is cutting the remaining $18,704 from operating expenses, mainly in travel and training, “just to kind of send a message to people that, hey, it’s time to scale back,” LaFleur said.
