Today the Office of Management and Budget Director Pam Sharp told the interim Government Finance Committee the State of North Dakota is still considered officially in a recession. The answer provided by Sharp to House Minority Leader Corey Mock’s question comes from analysis of Moody’s Analytics who projected the state would re-emerge from the recession that started in mid-2016 by the end of that year. Their prediction was inaccurate along with multiple prior projections.
According to a document dated August 1, 2017, provided by Moody’s Investors Service:
- The oil-driven economic recession has significantly reduced jobs, personal income and gross state product, and the time of recovery is uncertain given the limited economic diversification beyond energy and agriculture.
- Revenues declined 36% in the last biennium
- An 11% budget gaps remains in the 2017-2019 biennium, although this is significantly improved from the 28% gap in the prior biennium
The document also points to some of the strengths in our state to bounce back such as very low debt, substantial reserves, and that previous spending was mainly focused “one-time” expenses such as capital projects.
This legislative committee is tasked with studying our state’s volatile revenues. A prudent study since our budget relies so heavily on volatile commodities. Unfortunately, the study was adopted after a legislative session which saw billions of dollars in cuts to vital programs and services such as rural DOT maintenance shops. The opportunity and origination of this volatility study was presented in the 2015 legislative session by former Senate Minority Leader Mac Schneider. The majority party in the Senate rejected the proposal then.
There is no way of telling what would have been decided had Schneider’s study been approved and selected in 2015. Yet, nobody can dispute that valuable time to find potential budgetary solutions has passed because partisan politics prevailed over prudent policy making. Instead, without a plan, the general fund and reserves were depleted to get by for the next two years.
Our economy is primarily driven by agriculture and energy. Both are determined by outside forces beyond our state’s control. What is in our control is how we budget our state government. We’ve moved to reliant on revenue from these volatile commodities. Let’s hope this committee finds some viable alternatives to keep essential government services funded in the future.