“Odds are increasing by the day” for a Special Legislative Session. Governor Burgum Hasn’t Ruled it Out

North Dakota is facing a stark budget outlook. The agriculture economy has seen low commodity prices, frustrating weather, and loss of trade markets. Oil prices are hovering around $24 per barrel leading to a slow down in the Bakken. Couple this with the unprecedented economic and health disruptions from covid-19 and Governor Burgum along with state lawmakers have a lot of work ahead.

On NDx we’ve talked at length about the less than desirable economic situation facing our family farmers. They have dealt with the most prolonged economic hardship in the state. Commodity prices have been down for years. The prolonged trade way has hampered market access. Biofuel waivers from Trump’s EPA to refineries have further impacted demand. Now, with the global situation in oil, ethanol is likely going to be taking an even bigger hit with the potential for ethanol plants closing across the state and nation.

State Senator Larry Robinson talks about the state budget and potential legislative response (3/24/2020)

Speaking of oil, ND collects more than half of its state revenue from oil activity. In January of 2020, oil started at over $60 a barrel. As of this writing, it is at $24.32 per barrel. The slow down in production has led to a jump in layoffs. The state anticipated and planned for approximately $48 per barrel for budget purposes. With fifteen months left in the current biennium, will funding priorities be met?

In addition to relying heavily on oil and gas taxes, ND’s budget leans on sales taxes. With bars, restaurants, and other retail businesses closed in an attempt to flatten the curve of covid-19, and the slow down in purchases from farmers and oil businesses, expect a drop in sales tax collection. Even though the tax rate is minimal, incomes across the state are also taking a hit. What do you suspect that means for corporate and income tax collections?

The bottom line is, ND’s tax collections are about to dramatically drop while government spending is about to dramatically go up. Two-year budgets that were set in 2019 with rosier forecasts may need to be critiqued before the end of this biennium. The odds of a special session are “increasing by the day” as Sen. Robinson said in our KFGO interview above.

According to reports, Governor Burgum hasn’t ruled out the possibility of calling legislators back to Bismarck. This is the latest example that ND’s biennial Legislature needs to start meeting annually to better address the rapidly changing challenges we face as a state. We can’t continue to plan and budget for two years on such volatile commodities of any given cycle.

These unprecedented circumstances demand bold action. Federally, they have agreed to $2 TRILLION in a relief package. That has yet to become law and administered. Experts say that the relief package may not be enough to bridge the economy back to normalcy. We are fortunate to have the legacy fund in ND to fill some of the gaps that will be in federal relief.

Governor Burgum has initiated many of the executive orders necessary to get the gears turning. Additionally, the BND has stepped up. NDx called for some of those steps at the end of last week. More bold action will be needed in the days, weeks, and months ahead. The rain is just starting to collect in ND. Thankfully, voters created a rainy day fund to assist in a moment like we face now.