Budget Section
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15.5171.03000 NORTH DAKOTA LEGISLATIVE MANAGEMENT Minutes of the BUDGET SECTION Wednesday, September 24, 2014 Senate Chamber, State Capitol Bismarck, North Dakota Representative Chet Pollert, Chairman, called the meeting to order at 9:45 a.m. Members present: Representatives Chet Pollert, Larry Bellew, Mike D. Brandenburg, Al Carlson, Bill Devlin, Mark A. Dosch, Rick Holman, Keith Kempenich, Gary Kreidt, Bob Martinson, Corey Mock, David Monson, Kenton Onstad, Mark Sanford, Roscoe Streyle, Blair Thoreson, Don Vigesaa, Alon Wieland, Clark Williams; Senators Bill L. Bowman, Ron Carlisle, Robert Erbele, Joan Heckaman, Ray Holmberg, Ralph Kilzer, Jerry Klein, Gary A. Lee, David O'Connell, Larry J. Robinson, Mac Schneider, Terry M. Wanzek, Rich Wardner, John M. Warner Members absent: Representatives Tracy Boe, Jeff Delzer, Eliot Glassheim, Bette Grande, Ron Guggisberg, Kathy Hawken, Jon Nelson, Robert J. Skarphol; Senators Tony Grindberg, Karen K. Krebsbach, Tim Mathern Others present: Sean B. Smith, Legislative Council, Bismarck Representative Jim Schmidt, member of the Legislative Management, was also in attendance. See Appendix A for additional persons present. It was moved by Senator O'Connell, seconded by Senator Robinson, and carried on a voice vote that the minutes of the June 25, 2014, meeting be approved as distributed. STATUS OF THE GENERAL FUND Ms. Pam Sharp, Director, Office of Management and Budget, presented a report (Appendix B) on the status of the general fund. Ms. Sharp presented the following information on the status of the general fund as of August 31, 2014, for the 2013-15 biennium: Unobligated general fund balance - July 1, 2013 $1,396,059,186 Balance obligated for unspent emergency appropriation authority 165,874,199 Balance obligated for authorized carryover from the 2011-13 biennium 89,503,462 Total beginning general fund balance - July 1, 2013 $1,651,436,847 Add General fund collections through August 2014 $3,280,745,030 Forecasted general fund revenue for the remainder of the 2013-15 2,450,691,417 biennium Total revenues 5,731,436,447 Total available $7,382,873,294 Less Legislative appropriations - One time ($2,433,567,701) Legislative appropriations - Ongoing (4,429,019,653) Contingent appropriation - Dickinson State University (6,000,000) Contingent appropriation - Department of Public Instruction (5,000,000) Authorized carryover from the 2011-13 biennium (89,503,462) 2013-15 emergency appropriations utilized in the 2011-13 biennium 163,812,041 Total appropriations (6,799,278,775) Estimated ending general fund balance - June 30, 2015 $583,594,5191 1Pursuant to North Dakota Century Code Section 54-27.2-02, any end-of-biennium balance in excess of $65 million must be transferred to the budget stabilization fund, up to a maximum of 9.5 percent of general fund appropriations. North Dakota Legislative Council September 24, 2014 15.5171.03000 Budget Section Ms. Sharp presented information (Appendix C) on general fund revenue collections for August 2014 and the 2013-15 biennium to date. She said general fund revenues collected for the biennium to date are $254.6 million, or 8.4 percent more than the original legislative forecast. ECONOMIC INDICATORS Ms. Sharp presented information (Appendix D) on the key economic indicators, including consumer prices, money markets, personal income, commodity prices, unemployment, energy prices and production, and interest rates. PRELIMINARY 2013-15 BIENNIUM REVENUE FORECAST Ms. Sharp presented information (Appendix E) regarding the revised 2013-15 biennium revenue forecast and the preliminary 2015-17 biennium revenue forecast. She said 2013-15 biennium revised revenue forecast estimates total general fund revenues of $4.9 billion, $285 million more than the 2013 legislative forecast. She said the preliminary 2015-17 biennium revenue forecast estimates total general fund revenues of $5.2 billion, $293 million more than the 2013-15 biennium revised forecast. Ms. Sharp provided the estimated oil tax revenue and revenue allocations for the revised 2013-15 biennium forecast and the preliminary 2015-17 biennium forecast as shown on the schedule below. She said the August 2014 preliminary revenue forecast is based on oil production reaching 1.3 million barrels per day by the end of the 2013-15 biennium and increasing to 1.4 million barrels per day by the end of the 2015-17 biennium, and oil prices are expected to average $90 per barrel during this period. 2013-15 Biennium 2015-17 Biennium (Amounts Shown in Millions) (Amounts Shown in Millions) Estimated oil revenue allocations General fund $300.0 $300.0 Legacy fund 2,458.3 3,186.5 Property tax relief fund 341.8 341.8 Strategic investment and improvements fund 1,285.9 2,019.8 Political subdivisions 776.5 967.5 Tribal allocations 513.3 583.2 Foundation aid stabilization fund 375.6 517.9 Common schools trust fund 375.6 517.9 Resources trust fund 720.0 928.0 Renewable energy development fund 3.0 3.0 Energy conservation fund 1.2 1.2 Infrastructure revolving loan fund 27.0 103.6 Oil and gas impact grant fund 240.0 240.0 State disaster fund 22.0 22.0 North Dakota outdoor heritage fund 23.8 29.6 Well plugging and site reclamation fund 10.0 10.0 Oil and gas research fund 10.0 10.0 Estimated state oil tax revenue $7,484.0 $9,782.0 Representative Carlson expressed concern regarding the preliminary revenue forecast for sales tax and personal income tax collections for the 2015-17 biennium. He said it appears the forecast may be too aggressive in these areas. Senator Lee expressed concern regarding the oil revenue projections for the 2015-17 biennium and the forecasted price of $90 per barrel of oil used to calculate the revenue. He believes the forecasted price is higher than appropriate based on the current price of a barrel of oil which is lower than $90. Ms. Sharp said the Tax Department reported the actual average price per barrel of oil was approximately $90 for the 2013-15 biennium to date. She said Moody's projected a price in excess of $90 per barrel of oil for the 2015-17 biennium. Representative Kempenich expressed concern regarding the potential effect commodity price declines and the agricultural economy will have on state revenues during the 2015-17 biennium. In response to a request from Representative Onstad, Ms. Sharp later during the meeting, provided information to the Budget Section indicating that for the month of August 2014, 38 percent of the total oil and gas tax revenue excluding the tribal share was deposited into the legacy fund. This amount includes additional deposits due to the balance in the strategic investment and improvements fund being in excess of $300 million. North Dakota Legislative Council 2 September 24, 2014 15.5171.03000 Budget Section AGENCY BUDGET REQUESTS Ms. Sharp presented information (Appendix F) regarding the number of agency budget requests submitted by the July 15, 2014, statutory deadline, the number submitted to date, the number of extensions granted, and new submission deadlines. She said 11 of the 70 agency budgets were submitted by the July 15, 2014, deadline and 57 of the 70 agency budgets have been submitted as of September 22, 2014. She said 13 agency budget requests have not been submitted and have been granted extensions as follows: Extension Date Granted as of Agency September 22, 2014 Governor's office September 30 Office of Management and Budget October 1 Information Technology Department September 29 Department of Public Instruction November 10 Department of Human Services October 10 Industrial Commission October 3 North Dakota Mill and Elevator September 30 Department of Corrections and Rehabilitation October 15 Adjutant General September 26 Department of Commerce October 15 Game and Fish Department September 25 State Water Commission October 15 Department of Transportation October 3 IRREGULARITIES IN THE FISCAL PRACTICES OF THE STATE Pursuant to Section 54-14-03.1, Ms. Sharp presented information (Appendix G) on irregularities in the fiscal practices of the state. She presented the following fiscal irregularity for the period May 2014 through July 2014: Agency Fiscal Irregularity Amount Tax Department Temporary workload adjustment $500 EMPLOYEE BONUSES Ms. Sharp presented information on the number of state employees receiving salary bonuses above the 25 percent limitation pursuant to Section 54-06-30. She said agencies may not give bonuses to more than 25 percent of their employees, except in special circumstances approved by Human Resource Management Services. She said Human Resource Management Services is required to report any exceptions to the Budget Section. She said no agencies made requests or exceeded the 25 percent limitation as of July 1, 2014. TOBACCO SETTLEMENT PROCEEDS Ms. Sharp presented information (Appendix H) on the status of tobacco settlement proceeds received by North Dakota. She said total payments received to date are $433.3 million, and the next payment is anticipated to be received in April 2015. She said the April 2014 payment totaled $34 million, of which $22.8 million was deposited in the tobacco settlement trust fund and $11.2 million was deposited in the tobacco prevention and control trust fund. A summary of the recent collections is listed below. Tobacco Settlement Tobacco Prevention and Trust Fund Control Trust Fund Total Period (Amounts Shown in Millions) (Amounts Shown in Millions) (Amounts Shown in Millions) April 2012 $20.1 $11.4 $31.5 April 2013 20.1 11.4 31.5 April 2014 22.8 11.2 34.0 Total $63.0 $34.0 $97.0 STATE AGENCY APPLICATIONS FOR FEDERAL GRANTS Ms. Sharp presented information (Appendix I) on state agencies that applied for federal grants estimated to be $25,000 or more pursuant to Section 54-27-27. She said for the period June 2013 through June 25, 2014, the following agency has applied for a federal grant estimated to be $25,000 or more: Agency Time Period of Grant Amount Department of Public Instruction July 2015 through June 2017 $400,000 Ms.