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OUR OPINIION: N.D. reaps the benefit of its strong economy

The line trends gradually upward for more than 40 years, showing the North Dakota legislative budget growing from $200 million in 1961 to $2 billion in 2005.

The line trends gradually upward for more than 40 years, showing the North Dakota legislative budget growing from $200 million in 1961 to $2 billion in 2005.

But then, the rate of rise changes, and the line snaps sharply upward. Spending soared from 2005, it shows, growing by more than 50 percent to $3.2 billion in the 2009-2011 biennium.

Should North Dakota be concerned about that growth, which the chart prepared by the North Dakota Taxpayers Association describes?

Sure. The current growth rate clearly can't be sustained. The legislative budget hit $800 million in 1980 and took about 20 more years to double to $1.6 billion. But from that point in 2000, it doubled again to $3.2 billion in only about 10 years.

At that rate of doubling -- 20 years, 10 years, 5 years, 2ยฝ years and so on -- North Dakota would be spending a trillion dollars in only about nine more years.

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State leaders must recognize this and fully understand that the exponential growth rate simply can't be sustained.

That's the bad news. The good news is that the growth rate won't be sustained. In fact, spending for the 2011-2013 biennium not only will fail to carry out the dire forecast above, it may even be at or below 2009-11's $3.2 billion because that figure is so inflated by one-time federal stimulus dollars.

Trend is not destiny, and there's no law saying North Dakota must follow projections on a graph. Better questions might be, What is the state's underlying fiscal health? And, is that health robust enough to handle even the doubling of the state budget that has happened from 2000 to today?

The answers seem to be these: North Dakota's fiscal health is good, and yes, it can handle the budgets for 2009-11 and likely beyond. States, like people, generally don't get into financial trouble overnight. Instead, warning signs show before the crisis hits; and in North Dakota today, those warning signs are absent.

Just the opposite: North Dakota state government remains in good financial shape. As Gov. John Hoeven points out, the state government had no reserves at all in 2000. So, while the legislative budget has indeed doubled since then, revenues have jumped as well, so much so that the state is projected to finish the 2009-2011 biennium with a $700 million surplus.

In other words, spending charts show only half the story. Revenue charts matter, too -- and they show revenues keeping up with spending growth.

Moreover, it didn't take a tax hike to make that revenue grow. North Dakota benefited not only from high oil and farm commodity prices, but from strong manufacturing, tourism and other sectors of the economy. So, the Legislature's 2009 session cut rather than raise income taxes and remains confident of a healthy revenue stream.

Here's another measure: In North Dakota, state government spending has grown, but individual prosperity has grown, too. Not long ago, per capita income in the state stood at 84 percent of the national average. It's at 99 percent today, having almost fully caught up -- an important measure in a state that for decades has come up short.

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Also telling is the fact that North Dakota is paying its way forward without going into debt. Unlike many states (including Minnesota), North Dakota isn't borrowing money to tackle its infrastructure improvements. Such projects as the new education building at UND are being paid for in cash.

And whether one is looking at a household, a state government or the federal government, the ability to pay cash for major purchases is a sign of financial health. Yes, North Dakota has obligations going forward. But it hasn't made the picture worse by taking on credit-card debt, and that's a good thing.

A deep recession could change this outlook. But healthy states can handle setbacks better than distressed states can; and judging by indicators such as budget reserves, debt load and the unemployment and foreclosure rates, North Dakota remains a healthy state. It's an enviable position to be in.

-- Tom Dennis for the Herald

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