Economic Growth Builds General Fund Revenues

Press Release

Economic Growth Builds General Fund Revenues

The Office of Management and Budget (OMB) today released updated revenue projections for the 2007-2009 biennium and preliminary revenue projections for the 2009-2011 biennium. The revenue projections are prepared by Economy.com, the state's economic forecasting firm, and OMB.

North Dakota does a preliminary revenue projection during the summer. Another updated revenue projection will be done in November, prior to the legislative session for the budgeting process.

"Diversified economic growth in North Dakota is boosting the state's General Fund. Sales and use tax, and individual and corporate income tax showed the largest growth, but we see substantial growth across all sectors and across the state, reflecting higher wages and more disposable income," said Office of Management and Budget Director Pam Sharp.

The revised revenue projection, excluding transfers, for the 2007-2009 biennium indicates revenues of $2.5 billion, which is a $363 million increase over the legislative forecast. With the growth in revenues, and an increase in the General Fund cash balance, the projected growth in the General Fund ending balance is $454 million.

In addition, growth in oil revenues is increasing the balance in the Permanent Oil Tax Trust Fund. The trust fund revenues for 2007-2009 are projected to be $625 million, which is $479 million over the 2007 legislative forecast.

Looking at the state tax revenue picture as a whole, sales and use taxes (including motor vehicle) account for 37 percent of total revenues, reflecting gains in manufacturing, value-added agriculture, technology-based businesses, tourism and other industry sectors. Income taxes, both personal and corporate, account for 31 percent; and tax receipts from oil provide 22 percent of total state tax revenues.

By law, however, only $71 million of oil tax revenue is deposited into the General Fund, which represents less than 3 percent of total General Fund revenues; 90 percent of the oil tax revenue is deposited into the separate Permanent Oil Tax Trust Fund.

Together, the projected general fund ending balance for the 2007-2009 biennium is $454 million, and the projected Permanent Oil Tax Trust Fund ending balance is $623 million, resulting in a total projected surplus of $1.076 billion. In addition, the state has a $200 million reserve held over from previous bienniums in the Budget Stabilization Fund.

Revenues for the 2009-2011 biennium, excluding transfers, are projected to be $2.7 billion, which is more than $202 million over the revised 2007-2009 forecast. Revenues flowing into the Permanent Oil Tax Trust Fund in 2009-2011 are projected to be $666 million, which is $40 million more than the 2007-2009 biennium. The preliminary revenue projection for 2009-2011 reflects continued growth in the state's economy.

"Our aggressive economic development efforts and our focus on targeted industries like energy, value-added agriculture and advanced manufacturing are really paying off," Gov. John Hoeven said. "This growing economic base will enable us to fund priorities, provide tax relief and continue to build a strong reserve for the future. For example, we have placed a $300 million education funding and property tax relief plan on the table. With the growth in our economy we can expand this plan and provide even more tax relief to the hard-working citizens of North Dakota."

Source