General Fund Revenues Steady, Oil Revenues Lower

Press Release

General Fund Revenues Steady, Oil Revenues Lower

Reserve Below November Projection, Above Conservative Scenario

A new forecast by Economy.com, the state's financial consulting firm, shows General Fund revenues holding steady and oil revenues down from the company's November 2008 forecast. However, petroleum prices are projected to trend gradually upward in the next biennium. Under Economy.com's lower petroleum price projection the state would maintain a reserve position of nearly $1 billion. That is below the $1.2 billion forecasted earlier, but well above the most conservative scenario of $800 million developed by the state Office of Management and Budget in November.

Economy.com has provided new projections for the balance of the 2007-2009 biennium, as well as for the 2009-2011 biennium. The forecast is an update of the projections provided in November 2008.

For the current biennium ending June 30, 2009, the General Fund revenue forecast has increased by $15.3 million to bring total revenues to $2.697 billion. In the 2009-2011 biennium, forecasted General Fund revenues have been reduced by $38.4 million, to a total of $2.745 billion. The forecasted General Fund revenue growth from the 2007-2009 biennium to the 2009-2011 biennium is a conservative 1.8 percent due to challenges faced by the national economy and their impact on North Dakota.
Reserve Position Remains Strong

Under Economy.com's new estimate, funding at the Executive Budget level would leave 2009-2011 reserves at $978 million. That consists of $64 million in the General Fund Ending Balance and $311 million in the Budget Stabilization Fund, both of which are little changed from the November forecast. It also includes $603 million in the Permanent Oil Tax Trust Fund, which is reduced from $829 million in the earlier forecast because Economy.com has reduced its forecasted price of oil for the 2009-2011 biennium.

This $978 million reserve figure is well above the more conservative $800 million reserve forecast prepared by OMB last November. That scenario assumed average oil prices of $40 a barrel and average production of 195,000 barrels a day. Economy.com predicts oil prices will be lower than its earlier forecast, but above $40 a barrel through the next biennium.

"Economy.com's forecast projects that we have the resources to properly fund our priorities, provide real tax relief, and set aside a healthy reserve for the future," Hoeven said.
Also, State Likely to Receive More than $500 Million in Federal Fiscal Stimulus Funding

The U.S. House of Representatives has passed a fiscal stimulus package, which is currently making its way through the U.S. Senate. This legislation could provide at least one half billion dollars in new funding to the State of North Dakota. Budget decisions for the 2009-2011 biennium will need to be coordinated with the additional federal funding for one-time investments in infrastructure, schools, and other areas that will help to create jobs and enhance the state's economy.

It is expected, for example, that the state could be allotted approximately $175 million or more for transportation infrastructure. This funding cannot supplant existing funding in 2007-2009, but it can be used for future spending on roads, bridges and other transportation construction and maintenance projects. Similarly, North Dakota could receive an additional $76 million in federal Medicaid matching funds, with some of those dollars flowing in during the current biennium. Education funding of about $32 million could be provided directly to school districts through Title I.

"It is important that we coordinate our budgeting decisions with these new one-time revenues, being careful to use one-time funding to create long-term benefits for the state, while holding the line on ongoing expenses," Hoeven said.

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