Budgets for Towns and Counties Likely to Feel Pressure. Will There Be Relief?

North Dakota’s towns and rural county budgets will be hit during the covid-19 pandemic. Although the $2.2 trillion CARES Act will provide ND $1.25 billion, it is unclear whether that will trickle down to local budgets. Based on guidelines, not a single town or county will qualify for direct federal relief in the package. Additionally, with oil prices sitting at $20 a barrel what should towns and counties expect from state relief including the new operation prairie dog? A lot of questions with few clear answers.

Coronavirus Relief Fund

North Dakota has accepted $1.25 billion in federal relief. The money was approved in the CARES Act. The federal relief is to be used on “necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19).” Pretty straight forward.

Yet, there is concern from cities and counties also feeling budgetary pressure. According to the U.S. Department of Treasury, local governments are “eligible for receipt of direct payment includes a county, municipality, town, township, village, parish, borough, or other unit of general government below the State level with a population that exceeds 500,000.” A population of over 500,000? In other words, not a single town or county in ND would be eligible for direct federal payments.

Documents received and interviews conducted by the Associated Press show concern and frustration. The AP reported, “The National League of Cities and the U.S. Conference of Mayors on Tuesday released a survey of more than 2,400 local officials that found 88% of them “anticipate the pandemic will lead to painful reductions in revenue this year” that will likely result in cuts to services, worker furloughs and layoffs. The groups said the outlook is ”particularly acute” for cities, towns and villages under the threshold.”

Because of the lack of specification in the bill, the CARES Act implementation is up to interpretation. There is growing pressure by associations and local leaders to make sure Treasury Secretary Mnuchin distributes the funds fairly. The Treasury Department guidelines may allow counties and cities to appeal directly to the governor for a portion of the state’s allotment. Will Governor Burgum and the Legislature write checks to local governments impacted? It is unclear what may be left for cities and counties after the state reimburses itself for the expenses they had to fight the virus.

Blake Crosby with the North Dakota League of Cities joined me on my radio show “Afternoons Live” to discuss the budget situation. You can listen to his response below and at KFGO.

State Relief Impacted by Tumbling Oil Prices

Impacted both by the pandemic and global fights, oil prices have tumbled since January. We started the year with over $60/barrel. As of this writing, we are at $20/barrel. The state budgeted for oil averaging $48/barrel. Over the years, ND has become more reliant on oil revenue to fund not only state budgets, but to provide relief and funding for counties, cities, and school districts.

“Operation Prairie Dog.”

A brief history. 2019’s HB 1066 or “Operation Prairie Dog”, made numerous changes to the oil and gas gross production tax distribution. Not to be confused with the oil extraction tax (that was cut by lawmakers in 2015) the oil and gas production tax primarily returned to counties, cities, and schools in the oil-producing counties. Operation prairie dog created new “buckets” of infrastructure funding for cities, counties, and townships in non-oil-producing counties and airports throughout the state. Up to $250,000,000 per biennium to infrastructure projects.

The new “buckets” would be filled up after other priorities are funded in the state formula. Roads, bridges, water & sewer projects, natural gas projects, and communications projects would be eligible for funding. Projections from state agencies show there is a real chance these buckets won’t receive the funding to meet the needs. Thus, towns and counties likely won’t be receiving the hyped prairie dog funding unless you’re one of the larger cities across the state.

Other Budgets

Here is the latest scenario I have seen compiled. This is an important note: “The alternate scenario is for informational purposes only and is not a revised forecast.” The alternate scenario reflects actual allocations through March 2020 and the following:

• North Dakota oil prices decreasing to a low of $20 per barrel in April 2020 and increasing to $26 per barrel for fiscal year 2020; and
• Oil production decreasing to 1.1 million barrels per day by July 2020 and remaining at 1.1 million barrels per day for the remainder of the biennium.

Tough Decisions

This post hasn’t even touched on the economic and budget impact that may have happened elsewhere. Will property tax payments be missed or delayed because of a household’s employment and income status? What more will that do to school, town, and county budgets? Commerce has slowed with forced closures and people rightfully staying home. What will be the impact on sales tax revenue? In some cases, fees have been waived in municipalities to help cash strapped residents. How long can services be maintained at reduced fee rates?

NDx first suggested a legislative special session a month ago when we asked about the workers. Though not everyone feels the need, people from various political backgrounds are starting to echo that call. Most of the numbers outlined above are the impacts on the budget we’re currently relying on. Not the next two years. Now.

Tough decisions need to be made. Lawmakers should examine how the Bank of North Dakota can be utilized. Increasing access to low-interest loans to cities and counties may be an option. Better yet, it is time to activate the resources in the Legacy Fund. If we don’t make necessary moves and investments to stop the flood before us collectively, the legacy we desire to leave will be vastly more difficult to achieve.