John Hoeven: Governor of North Dakota

News Releases for December 2008

December 3, 2008
For further information, please Contact the Governor's Office

Hoeven Delivers 2009-2011 Budget Address

2009-2011 Budget Address Slides (816kb pdf)

Fund Priorities, Provide Tax Relief, Build Reserves

BISMARCK, N.D. - Gov. John Hoeven today released his 2009-2011 Executive Budget, a balanced plan that achieves three important objectives for the State of North Dakota:

• First, we invest in the priorities that have consistently fueled our economic success - priorities like education, economic development, infrastructure, research and development, and jobs training programs. These are the investments that help us to create quality jobs, take care of those in need, and continue to improve the standard of living for all North Dakotans.
• Second, we provide $400 million dollars in broad-based tax relief to the hard working people of North Dakota. Our tax plan reduces property taxes by $300 million, and in addition, devotes $100 million in income tax relief for our citizens.
• And finally, we budget for sustainability over the long term. We set aside a healthy reserve of $600 million at the beginning of the biennium, and project growth to between $800 million and $1.2 billion in reserves by the end of the 2009-2011 biennium.

"Our budget strategy continues to pursue aggressive economic development to help us meet our long and short-term objectives," Hoeven said. "We have grown and diversified our economy, which gives us the resources to fund our priorities; provide real tax relief; and build stronger reserves than ever before. Our budget is sustainable, and it is also enterprising and farsighted."

Good Fiscal Management

Revenues Exceed Expenditures

In the 2009-2011 biennium, our General Fund ongoing revenues and transfers will total about $2.784 billion, after reduction of $100 million in income tax relief. At the same time, our ongoing expenditures will total about $2.754 billion. With these projections, you can see that ongoing revenues exceed ongoing expenditures. Overall, ongoing spending increases about 9 percent per annum, which is well within our means. (See Chart 1)

The state's growing revenues are reflected in a $392 million ending fund balance for the current biennium. This is our actual General Fund surplus after transfer of $111 million to the Budget Stabilization Fund, as required by law.

The Executive Budget takes a portion of this surplus - $357 million - and invests it in one-time capital needs and other critical areas, like infrastructure, capital projects, technology systems, equipment, extraordinary repairs, and deferred maintenance. (See Chart 2)

Returning Tax Dollars to the People of North Dakota

The Executive Budget proposes more than $500 million for a Tax Relief and Education Funding Reform Plan that dedicates $300 million to property tax relief; $100 million to income tax relief; and $130 million to K-12 education funding to help take the pressure off property taxes.

The package will reduce school levies by 75 mills, boost the state's share of education funding to 72 percent, and cut income taxes by up to 20 percent for North Dakota citizens in the lowest income bracket. Property tax relief is funded from Oil Tax Trust Fund revenues accrued in the current biennium. Income tax relief is funded by reducing the state income tax rate by a uniform 42 basis points across the board. (See Chart 3)

Reserves are Strong

Reserves grow from $608 million at the beginning of the 2009-2011 biennium, to between $800 million and $1.2 billion by the end of the biennium. Because of the volatility in the petroleum markets, we have prepared two reserve forecasts for the next biennium- one is based on the oil prices projected by Economy.com, the state's financial consulting firm, and the second uses the current price of crude oil all the way through the next biennium. Both, summarized below, show growth and provide for a stronger, larger reserve. (Charts 4, 5 and 6 attached, provide more detail.)

Economy.com oil price scenario

Current Oil Price Scenario

Funding Our Priorities - Investing In The Future

A Strong Budget for Education - Building the Future

• K-12 Education Funding: Provides an increase of $130 million, including $110 million for improving educational adequacy in K-12 and more than $18 million for early childhood programs, like kindergarten and pre-kindergarten. This $130 million, combined with the $300 million we've committed for property tax relief, provides a total of more than $400 million, which will not only strengthen education adequacy and improve teacher compensation, but also further take the pressure off property taxes.
• Higher Education Funding: Increases ongoing funding for the university system by $96 million, and further provides additional one-time funding of $74 million. This $170 million increase should make it possible for campuses to hold the line on tuition and fees to no more than the rate of inflation. The budget includes $40 million in the ongoing budget for higher education to fund ACT-ND, a direct needs-based tuition assistance program. When combined with federal Pell Grants, ACT-ND will cover between 80 and 100 percent of the cost of college tuition for eligible North Dakota high school graduates.

Workforce and Economic Development

Building a Workforce for the 21st Century: Provides an increase of $24 million to help not only our young people seeking their first career, but also older workers seeking new skills for a new, more diversified economy.

• Includes $10 million to support education and training programs like Rural Medical Tuition Scholarships for doctors, wind tower technician training, STEM Grants and other workforce-building programs. STEM Grants will provide up to $2,000 a year for up to five years - that's $10,000 - to assist young people studying in the fields of science, technology, engineering, or math.
• Includes enhanced funding for career and technology education programs, career advisors, and "Virtual CTE Centers" to help broaden the availability and quality of technical training programs across our state.

Infrastructure

• Provides $120 million Infrastructure Enhancement Plan, above and beyond expected revenue increases from established funding formulas for transportation.
• Fully funds a revised formula that maximizes federal funding and increases funding for counties, cities and townships, as well as more funding to help with county and regional transit systems.
• Helps Oil and Gas Producing Counties address the added wear and tear on their roads and bridges. The budget raises the annual per county cap on the oil tax distribution formula by $1 million for each county, and in addition, boosts the Oil Impact Fund from $6 million to $20 million.

Water Projects - Support for Northwest Area Water Supply Project, the Southwest Area Pipeline Project, and the Red River Valley Water Supply, and other state water projects.

• Funds the administration overhead for the Water Commission, and provides more than $100 million through the Resource Trust Fund for vital water projects throughout our state, in line with the recommendation of the State Water Coalition and the State Water Commission.
• Investments will bolster our transportation and water supply systems to meet the needs of our state's growing agriculture, manufacturing and energy economies.

Agriculture and Energy Development

Agriculture and Energy: Agriculture and value-added agriculture - tied with energy development - are important drivers in the growth of our economy. The budget includes $25 million more for agricultural and energy research.

• Builds on the $7 million we provided in the last session by providing an additional $11.5 million for Phase 2 of the new Agriculture Research Greenhouse. We also provide a significant funding increase for our Agricultural Experiment Stations, which are vital to the state's research efforts.
• Provides $5 million more in funding for biomass research and development, the next major phase in the progress of the biofuels industry. Includes funding to bring Biofuels PACE to $5 million, and a new program to encourage the installation of blender pumps at North Dakota retailers.

Traditional Energy

• Raises the cap on the Oil and Gas Research Fund, which will help us to do more with new technologies like horizontal drilling and tertiary oil recovery. Similarly, through our Lignite Research Fund, we are doing more to develop new methods of carbon capture and sequestration.
• Funds programs of EmpowerND, our comprehensive, multi-resource energy policy. Through EmpowerND, we are forging partnerships between and across industry sectors, both renewable and traditional. These partnerships are transforming our energy industry, and helping to make North Dakota a true powerhouse for the nation.

Quality of Life

Keeping North Dakota Safe - Last legislative session, we worked to strengthen our violent and sexual offender laws. In the upcoming session, we propose giving corrections officers more resources to enforce those laws.

• State Prison Funding: Two years ago, we set aside $41 million for a renovation and expansion of the state prison in Bismarck. Since then, we have worked closely with the Legislature's interim Correctional Review Committee to get further input on the plan. The Executive budget includes an additional $22.5 million to meet the need for on-premises medical facilities, more orientation cells, and a more secure administrative segregation unit for the most dangerous criminals.

Taking Care of People

• Medicaid: Increases funding for Human Services by $126 million. Our commitment to Human Services continues to increase, in part, because we are assuming a larger share of the costs of services formerly covered by the federal government. This year, because North Dakota's per capita income has risen again, we will need to dedicate an additional $10 million just to cover the cost of the state's share of Medicaid.
• SCHIP: This past year, we worked hard to win federal approval to raise the eligibility level for SCHIP from 140 to 150 percent of the poverty level. We now propose raising the eligibility level for SCHIP to 200 percent of the poverty level, and our budget provides the funding to do it.
• Childcare Support for Working Families: Increases total childcare assistance from less than $24 million to more than $36 million. That includes additional dollars for the state's Childcare Assistance Program, which helps low-income working families, and $3.5 million for a Childcare Provider Grant Program to help establish or expand provider facilities, as well as train and educate childcare workers. Combined with funding for mandatory criminal background checks for childcare workers, and a new pre-K program, these efforts will help families find quality childcare and build the workforce of  the future.
• Home and Community Based Care: Includes an increase of more than $17 million for Home and Community Based Care Programs to help North Dakota's elderly and people with disabilities maintain their independence. Establishes a new Aged and Disabled Resource Center to serve as a single point of entry for long-term care services. The budget also includes funding for additional managed care services, increased funding for Medicaid personal care, expanded meal delivery, and non-medical transportation.
• Long Term Care and Other Healthcare Providers: Dedicates $40 million to rebase Medicaid reimbursement rates for hospitals, doctors, dentists, chiropractors, and ambulance services. For nursing homes and other long term care providers, as well as providers serving the developmentally disabled, the budget includes a provider increase of 7 percent for each year of the new biennium to help address rising costs, recruit and retain providers, and maintain their outstanding quality of care.
• State Employees: Provides a salary increase of 5 percent each year of the biennium; continues, and fully pays health care premiums. Provides funding for equity to recruit and retain qualified state workers to serve the people of North Dakota.

Supporting Our Men and Women in Uniform

• Continues and expands Military Bonuses to cover multiple tours of duty.
• Includes funding to enhance the National Guard's reintegration program for North Dakota soldiers.
• Thanks our veterans by providing enhanced funding for the new Veterans Home in Lisbon. Builds on the $9 million appropriated last session with an additional $12 million to complete the new Veterans Home.

Building a Budget for the Future

"The budget I present to you today builds on the progress of the past," Hoeven said. "It continues to fund our priorities for growth, it provides real tax relief for our citizens, and it creates a stronger reserve than we have ever had before."

E-mail comments to the Governor

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