North Dakota -- Governor Hoeven Issues Budget Guidelines

NEWS

FOR IMMEDIATE RELEASE

May 5, 2010



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HOEVEN ISSUES 2011-2013 BUDGET GUIDELINES
Governor’s Directive Calls for Hold-Even Budget, Asks for 3 Percent Savings Option



BISMARCK, N.D. - Gov. John Hoeven today issued his Budget Guidelines for state government agencies in the 2011-2013 biennium before a meeting of cabinet heads and budget analysts at the State Capitol Building. Highlights of the address follow:



“In light of the ongoing national recession, and uncertainty as to when we can expect a full recovery of the nation’s economy, I am calling on you to develop a hold-even budget for the 2011-2013 biennium, with an optional 3 percent savings package. In other words, in the course of drafting your budget, I am asking you to identify reductions in spending of 3 percent of your baseline in the event we need additional savings.



“I would like you to continue your efforts, as you have in the past, to find greater efficiencies and more economical methods of operation within your departments. Look carefully at your expenditures, identify inefficiencies, prioritize programs, and find savings wherever possible. In our current national economic environment, you must base your budget decisions on these important principles.



“If you are considering a new program, you need to consider its value compared to existing programs. If you have initiatives or programs that will help better serve the citizens of North Dakota, you can submit them for consideration as optional requests, in order of priority, and show how you will offset them within your hold-even baseline.



“In the same vein, I am asking you to hold-even FTEs. As you hold the line on program spending, you should also hold the line on new hires. Additional staffing needs should be weighed against existing staff, and wherever appropriate, duties should be assigned according to your highest priorities.



There is a perception that any potential budget challenges can be met by strong oil revenues. Although our oil revenues are in fact strong, they do not contribute significantly for General Fund expenditures. Oil revenues are deposited largely into the Permanent Oil Tax Trust Fund, and other special funds. By statute, out of the $3.2 billion General Fund budget, just $71 million originates from oil revenues.



In addition, Hoeven said the national recession has particularly impacted some of the state’s larger companies, which are more dependent on national and international market forces.



“Although North Dakota has continued to grow, and managed to avoid the brunt of the economic downturn, the national economy has nevertheless put pressure on some of our national and global businesses. This is reflected primarily in our corporate income tax revenues, which are currently running below forecast. Eighty percent of North Dakota’s corporate income tax revenues come from national companies. When their national income is lower, these companies pay less income tax to North Dakota as a result.”



The Governor also cited expected increases to the state budget due to federal requirements. North Dakota will be required to pick up a larger share of Medicaid match because growing income levels in the state are driving a higher Medicaid match and because the federal Health Care Bill passed by Congress will put additional financial burdens on agencies:



“Also, we must recognize that we will face higher expenses in the next biennium due to federal requirements. For example, we know that we will continue to pay a larger share for programs like Medicaid because of growing personal income in our state. Additionally, the new health care bill passed in Washington will put a larger burden on our budget in the next biennium. Just how much larger is as yet unclear, but our initial estimates indicate it will be substantial. These factors call for a conservative approach to the budget process.”



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ATTACHMENT: Governor’s Budget Guidelines Address