North Dakota: The Strongest State Economy in the Nation.

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1 North Dakota: The Strongest State Economy in the Nation.

2 North Dakota General Fund Ending Balances $1.6 billion $1,200.0 $1,000.0 $800.0 $996.8 in millions $600.0 $400.0 $295.5 $362.0 $200.0 $0.0 $15.0 $ '

3 ND Total Reserves $4,549 $4,500 in millions $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $639 $1,242 $2,799 Reserve reflects about 100% of general fund expenditures. (79% if the Legacy Fund is excluded) Most states strive to reserve 10-15% of general fund spending. $500 $28 $118 $ ' (proj) Reserves total includes only: General Fund Ending Balance, Budget Stabilization Fund, Foundation Aid Stabilization Fund, Property Tax Sustainability Fund, Strategic Investment and Improvements Fund, Legacy Fund (beginning 2011), and Permanent Oil Tax Trust Fund (ending July, 2011). Chart: NDEPP Source: OMB

4 ND Total Oil Revenues in millions $3,829 $2,500 $2,042 $2,000 $1,561 $1,500 $1,000 $802 $500 $120 $192 $352 $ Biennium (proj)

5 North Dakota Permanent Oil Tax Trust Fund (in millions) Actual A Forecast Difference Executive Revised Legislative of Actual Budget Forecast (Nov. Projection 3 (June 30, 2011 ) 4 Forecast 2010) 2 Revenue 1 $484.3 $659 $323.1 $608.3 Million $890.2 $907.2 $ The forecasts assume an average price of $67.00 per barrel for FY 2011, $72.00 per barrel in FY 2012 and $75.00 per barrel during FY That is well below the Energy Information Administration forecast of $96 per barrel in 2011 and $101 per barrel average for EIA projects that WTI prices will continue to rise. According to EIA, West Texas Intermediate (WTI) crude oil spot prices fell from an average of $110 per barrel in April to $97 per barrel in July. During the first week of August, world crude oil prices fell by about $10 per barrel reflecting market concerns about world economic and oil demand growth. However, EIA still expects oil markets to tighten as growing liquid fuels demand in emerging economies continues to outpace supply growth with continuing upward pressure on oil prices. 2. The February Revised Revenue Forecast is not included because oil assumptions remained unchanged 3. Legislative Appropriations Book July Rev-E-News

6 Crude Oil Production in North Dakota: 1952 to (2011) ND Ranking in oil production 9 th in th in th in nd in 2012 (only behind Texas) 12,750 work in oil patch 2010 compared to 2,000 in ,000 projected by 2013 (projected 32% growth annually through 2016) Prepared by the North Dakota State Data Center July 2010, updated May 2012 NDEPP 6

7 Estimated Oil Tax Allocations of $3.8 billion As of September 2012 Reserve funds General fund Property tax relief Oil and Gas Research Fund Tribal Allocation State disaster relief fund $300 million to general fund $22 million to state disaster relief fund $347 million to oil/gas producing areas $4 million to the oil and gas research fund $162 million tribal allocation Reserve Funds $342 to property tax relief fund (considered a reserve fund) $688 million to the strategic investment and improvements fund Constitutionally designated trust funds Aid to oil producing cities and counties Constitutionally Designated Funds -$390 million to resources trust fund -$195 million to common schools trust fund -$195 million to foundation aid stabilization fund -$1.2 billion to legacy fund Projections based on continuation of September 2012 levels of oil tax collections. Source: OMB

8 Projected Oil Tax Allocations of $3.8 billion* (as of Sept 2012) Oil and Gas research 0% General fund 8% Tribal Allocation 4% State disaster relief fund 1% Aid to oil producing cities and counties 9% $300 million to general fund $22 million to state disaster relief fund $347 million to oil/gas producing areas $4 million to the oil and gas research fund $162 million tribal allocation Reserve Funds $342 to property tax relief fund (considered a reserve fund) $688 million to the strategic investment and improvements fund Reserve funds 78% Constitutionally Designated Funds -$390 million to resources trust fund -$195 million to common schools trust fund -$195 million to foundation aid stabilization fund -$1.2 billion to legacy fund Projections based on continuation of September 2012 levels of oil tax collections. Source: OMB

9 $4,000 $3,500 $3,000 Revenue by Major Tax Type (in millions) $3,829 $2,500 $2,000 $1,500 $1,000 $500 $1,561 $1,138 $1,298 $915 $802 $588 $682 $619 $353 $232 $240 $183 $1,927 $873 $377 $ (proj) Gross Sales and Use Individual Income Corporate Income Total Oil and Gas

10 $2,500 North Dakota General Fund Revenues (in millions) $2,000 $1,500 $1,000 $500 $0 Sales and Use Tax Individual Income Tax Corporate Income Tax Oil and Gas projected

11 Estimated General Fund Revenues $4.8 Billion Total Total All Funds Projected Revenues By Major Tax Type transfers and miscellaneous income $918 beginning balance $997 motor vehicle excise taxes $183 oil extraction and production tax $300 oil taxes $3.8 billion sales and use tax $2.6 billion income tax $1.3 income tax $1,250 sales and use tax $2,095

12 General Fund and Oil Revenue Growth $5 $4 $4 (in Billions) Total oil revenues = to 11% of General Fund revenues. Percentage of oil revenues that make up General Fund revenues 4% % of total oil revenues going to General Fund 35% Total oil revenues = to 93% General Fund Revenues. Percentage of oil revenues that make up General Fund revenues 6% % of total oil revenues going to General Fund 8% $3.3 $4.1 $3.8 $3 $2.6 $3 $2 $1.8 $2.0 $1.6 $2 $1 $0.8 $1 $0.2 $0.4 $0.071 $0.071 $0.071 $0.071 $0.300 $ (proj) General fund revenues Total oil tax revenues Oil Revenue Allocation to the General Fund

13 Share of Total General Fund Spending by major category (Prior to special session) Combined total of all categories equal to 100% of General Fund spending < 1.2 < < 1.4 < < 1.5 Nat'l Resources Ag and Eco Devo Public Safety Regulatory Health and Human Services 31.7 Higher Ed K General Gov't

14 Tax Relief Plan Governor s Proposed Initiatives for the Biennium Executive Budget Mill levy reduction grant program- Additional $400 million appropriation for biennium ($742 total) Homestead tax credit program- Additional $20 million appropriation for biennium. Expansion of eligibility through raising the income threshold to $50,000 and disregarding social security benefits in the income test Individual income tax reduction- $100 million rate reduction for biennium Corporate income tax reduction - $25 million rate reduction for Biennium Infrastructure Initiative Special transportation funding distribution to non-oil producing counties- $100 million appropriation County and township road reconstruction program- $145 million appropriation Enhanced road and highway fund for one-time investments, including truck reliever routes around cities, upgrading two-lane highways to four-lane, and underpasses- $1 billion appropriation Energy infrastructure and impact grant program- $135 million appropriation from Oil and Gas Impact Grant Fund Gross production tax formula- Change to increase allocation to oil and gas producing counties - $400million allocation of oil tax revenue Housing Initiative Additional Flex PACE buy down funds for low-interest loans to support the development of affordable housing projects - $12 million appropriation Expansion of Housing Incentive Fund ($30 million BND earnings and $5 million additional tax credits) bringing the total fund to $50 million Support for Fast-Growing Schools Expansion of school construction loan program by reserving $200 million of the Strategic Investment and Improvements Fund to provide lowinterest loans to qualifying school districts Energy infrastructure and impact grant program for schools- Proposal to set aside $25 million in the Oil and Gas Impact Grant Fund for rapidly growing schools impacted by oil development

15 Spring before legislative session: Governor Announces Budget Guidelines Building the Budget Summer before legislative session: State agencies prepare budget requests and submit to Governor Where can I get involved in the budget process? Election! December before legislative session: Governor presents budget to legislature Legislative Session: Legislature reviews, amends and passes budget. Budget bills returned to Governor for signature. Anywhere! There are multiple ways to have your voice heard in the budgeting process.

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