North Dakota Legislative Management Meeting Minutes 21.5160.03000 BUDGET SECTION Thursday, September 17, 2020 Senate Chamber, State Capitol Bismarck, North Dakota Senator Terry M. Wanzek, Chairman, called the meeting to order at 9:00 a.m. Members present: Senators Terry M. Wanzek, Brad Bekkedahl, Dick Dever, Robert Erbele, John Grabinger, Joan Heckaman, David Hogue, Ray Holmberg, Jerry Klein, Karen K. Krebsbach, Gary A. Lee, Tim Mathern, Dave Oehlke, Nicole Poolman, Larry J. Robinson, Ronald Sorvaag, Rich Wardner; Representatives Bert Anderson, Thomas Beadle, Larry Bellew, Tracy Boe, Josh Boschee, Mike Brandenburg, Jeff Delzer, Karla Rose Hanson, Richard G. Holman, Michael Howe, Lawrence R. Klemin, Gary Kreidt, Scott Louser, Bob Martinson, Lisa Meier, Corey Mock, David Monson, Mike Nathe, Jon O. Nelson, Chet Pollert, Mark Sanford, Mike Schatz, Jim Schmidt, Randy A. Schobinger, Don Vigesaa Member absent: Representative Keith Kempenich Others present: John Bjornson and Levi Kinnischtzke, Legislative Council See Appendix A for additional persons present. It was moved by Senator Robinson, seconded by Representative Vigesaa, and carried on a voice vote that the minutes of the August 13, 2020, meeting be approved as distributed. STATE BUDGET INFORMATION General Fund Status Mr. Joe Morrissette, Director, Office of Management and Budget, presented a report (Appendix B) on the status of the general fund and the balances of selected special funds. He presented the following information on the status of the general fund for the 2019-21 biennium: Unobligated general fund balance - July 1, 2019 $65,000,000 Balance obligated for authorized carryover from the 2017-19 biennium 130,404,813 Total beginning general fund balance - July 1, 2019 $195,404,813 Add General fund collections to date $3,276,912,351 Remaining forecasted general fund collections 1,622,758,285 Total estimated general fund collections 4,899,670,636 Total estimated revenues available $5,095,075,449 Less Legislative appropriations - One-time ($48,639,068) Legislative appropriations - Ongoing (4,794,924,098) Authorized carryover from previous biennium (130,404,813) 2019-21 authority spent in 2017-19 pursuant to emergency clause 106,000 Total appropriations (4,973,861,979) Estimated ending general fund balance - June 30, 2021 - Before transfers $121,213,470 Transfer to budget stabilization fund1 0 Estimated ending general fund balance - June 30, 2021 $121,213,470 1Pursuant to North Dakota Century Code Chapter 54-27.2, any end-of-biennium balance in excess of $65 million must be transferred to the budget stabilization fund, up to a maximum of 15 percent of general fund appropriations. The budget stabilization fund is estimated to be at the maximum balance at the end of the 2019-21 biennium. North Dakota Legislative Council September 17, 2020 21.5160.03000 Budget Section Balances of Selected Special Funds Mr. Morrissette presented the following schedule detailing estimated fund balances of selected special funds as of August 31, 2020: Budget stabilization fund $726,903,6111 Legacy fund $7,015,997,683 Foundation aid stabilization fund $375,960,307 Tax relief fund $290,474,146 1June 30, 2020, balance Mr. Morrissette said the balance of the strategic investment and improvements fund on June 30, 2020, was $768,070,988. He said of this amount, $673,192,439 is obligated which provides for an unobligated balance of $94,878,549. In response to a question from Representative Bellew, Mr. Morrissette said approximately $3 million of oil and gas tax collections were deposited in both the foundation aid stabilization fund and common schools trust funds during August 2020. In response to a question from Senator Bekkedahl, Mr. Morrissette said he will provide the committee with information regarding the status of the resources trust fund. Irregularities in the Fiscal Practices of the State Pursuant to Section 54-14-03.1, Mr. Morrissette presented information (Appendix C) on irregularities in the fiscal practices of the state. He presented the following fiscal irregularities for the period June 2020 through August 2020: Agency Fiscal Irregularity Amount North Dakota School for the Blind Payment of contract after employee resignation $7,332 Highway Patrol Payout of excess annual leave $7,756 North Dakota School for the Blind Work days in excess of contract $6,742 Department of Career and Technical Education Temporary workload adjustments $3,027 Department of Human Services Additional payment for licensure $1,196 Department of Human Services Workload increase $2,260 Council on the Arts Temporary workload adjustments $2,550 State Agency Applications for Federal Grants Mr. Morrissette presented information (Appendix D) on state agencies that applied for federal grants estimated to be $25,000 or more pursuant to Section 54-27-27. He said the following agencies have applied for a federal grant estimated to be $25,000 or more: Agency Time Period of Grant Amount Department of Public Instruction 2020 through 2025 $2,100,000 Industrial Commission Up to 5 years $26,157 Mr. Morrissette said federal grants were awarded recently to the Department of Human Services for the senior employment program, the Department of Commerce to increase apprenticeship opportunities, and the Department of Transportation for grants to replace transit vehicles. 2019-21 Biennium Revised Revenue Forecast and Preliminary 2021-23 Biennium Revenue Forecast Mr. Morrissette presented information (Appendix E) regarding the 2019-21 biennium revised revenue forecast and the 2021-23 biennium preliminary revenue forecast. He said oil prices are forecasted to average $32 per barrel for the remainder of the 2019-21 biennium and increase to $34.50 per barrel the 1st year of the 2021-23 biennium and to $36 per barrel the 2nd year of the biennium. He said oil production is forecasted to remain at 1.25 million barrels per day through the end of the of 2021-23 biennium. Mr. Morrissette presented the following schedule comparing total oil tax allocations under the revenue forecasts: 2019-21 Biennium 2019-21 Biennium Revised Preliminary 2021-23 Legislative Forecast Revenue Forecast Biennium Forecast Total oil tax allocations $4,851,193,101 $3,415,479,818 $3,032,703,787 Mr. Morrissette presented the following schedule comparing the 2019-21 biennium revised general fund revenue forecast to the 2019 legislative forecast: North Dakota Legislative Council 2 September 17, 2020 21.5160.03000 Budget Section Tax 2019 September 2020 Type Legislative Forecast Revised Revenue Forecast Increase (Decrease) Sales and use taxes $1,868,262,000 $1,771,298,564 ($96,963,436) Motor vehicle excise tax 249,951,800 225,871,814 (24,079,986) Individual income tax 803,305,000 792,937,603 (10,367,397) Corporate income tax 132,268,000 178,960,333 46,692,333 Insurance premium tax 72,944,050 94,520,219 21,576,169 Oil and gas taxes 400,000,000 400,000,000 0 Gaming tax 7,511,200 28,304,238 20,793,038 Lottery 12,245,000 10,222,500 (2,022,500) Cigarette and tobacco tax 47,838,000 48,670,505 832,505 Wholesale liquor tax 18,703,000 18,268,734 (434,266) Coal conversion tax 41,438,000 42,398,724 960,724 Mineral leasing fees 38,000,000 29,368,017 (8,631,983) Departmental collections 91,521,566 78,964,720 (12,556,846) Interest income 10,000,000 28,272,315 18,272,315 State mill transfer 13,400,000 10,923,841 (2,476,159) Bank of North Dakota transfer 140,000,000 140,000,000 0 Legacy fund transfer 100,000,000 235,630,000 135,630,000 Tax relief fund transfer 8,600,000 8,600,000 0 Strategic investment and 764,400,000 764,400,000 0 improvements fund transfer Gas tax administration 1,991,024 1,991,418 394 Miscellaneous revenue 581,000 1,643,059 1,062,059 Total revenues $4,822,959,640 $4,911,246,604 $88,286,964 Mr. Morrissette said based on the revised forecast, the estimated June 30, 2021, balance of the general fund is $160.5 million. Mr. Morrissette presented the following schedule comparing the preliminary 2021-23 biennium general fund revenue forecast with the revised 2019-21 biennium general fund revenue forecast for major tax types: 2019-21 Biennium Revised 2021-23 Biennium Revenue Forecast Preliminary Forecast Increase (Decrease) Sales and use taxes $1,771,298,564 $1,700,264,000 ($71,034,564) Motor vehicle excise tax 225,871,814 237,728,000 11,856,186 Individual income tax 792,937,603 782,127,000 (10,810,603) Corporate income tax 178,960,333 189,033,000 10,072,667 Total $2,969,068,314 $2,909,152,000 ($59,916,314) In response to a question from Senator Holmberg, Mr. Morrissette said representatives of the Department of Mineral Resources and the oil and gas industry provided input into the revised revenue forecast for oil and gas tax collections. In response to a question from Representative Pollert, Mr. Morrissette said 50 to 60 well completions are needed each month to maintain a consistent level of oil production under the revised revenue forecast. In response to a question from Senator Holmberg, Mr. Morrissette said the revised 2019-21 biennium general fund revenue forecast provides for a positive balance for the general fund at the end of the biennium. He said based on the revised forecast, budget allotments will not be needed. In response to a question from Representative Delzer, Mr. Morrissette said the revised revenue forecast projects $135.6 million of legacy fund earnings will be deposited in the general fund in addition to the $100 million originally projected. He said the increased deposit amount will offset projected reductions in other general fund revenue sources. Other Budget Information Mr. Morrissette presented information (Appendix F) regarding state agency expenditure of federal Coronavirus (COVID-19) funding and the status of state agency budget request submissions.