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Published April 29, 2011, 07:40 PM

Dalrymple Budget Plan Masked Huge Spending Increase

North Dakota Gov. Jack Dalrymple's budget plan obscured a huge spending increase by financing new road construction and property tax subsidies from a separate state account financed by surplus oil revenues, records show.

By: Dale Wetzel, Associated Press

BISMARCK, N.D. (AP) — North Dakota Gov. Jack Dalrymple's budget plan obscured a huge spending increase by financing new road construction and property tax subsidies from a separate state account financed by surplus oil revenues, records show.

The Republican governor's budget recommendations, when presented to the Legislature in December, proposed $3.3 billion in general fund spending during the 2011-13 budget period, an increase of 1.4 percent from current levels.

When the Legislature finished its work on the state's next two-year budget on Thursday, the general fund budget had risen 25 percent, to almost $4.1 billion, even though Dalrymple and the Legislature's Republican majority leaders said its final spending levels were similar to what the governor first proposed.

The reason, Dalrymple and legislative analysts say, is the governor's plan accounted separately for some large expenditures, including $370 million for road repairs in western North Dakota's oil country and almost $342 million in payments to local schools that will be used to reduce local property taxes.

Those programs were financed by a fund for surplus oil taxes that has often been used as a piggy bank for favored projects. The Legislature abolished the fund, which is called the Permanent Oil Tax Trust Fund, and ordered that the money be transferred to the general fund.

"Dalrymple's budget was trying to be sneaky," said Dustin Gawrylow, director of the North Dakota Taxpayers Association. "It comes down to creative accounting. What happened was that the Legislature had to clean up the governor's budget because it was not presented in a straightforward way."

Dalrymple said the structure of his budget recommendations was easy to comprehend. It was presented as it was to separate road repairs, building projects and other non-recurring expenses from state government's ongoing costs, such as employee salaries, medical care for the poor and state aid to schools, he said.

"I do think, from a budgeting standpoint, that is an important distinction to make, whether you're looking back, looking at the present or looking at the future," Dalrymple said. "I think our budget proposal was very straightforward. I think it's very understandable. I think it's appropriate to separate ongoing spending from one-time spending."

Legislators believed Dalrymple's budget structure also was an attempt to minimize the shock value of a general fund spending increase of more than 20 percent over two years.

North Dakota's general fund is financed mostly by state taxes on sales, income and energy, and the size of the general fund budget of North Dakota government is a closely watched and frequently reported number.

It does not represent the total state budget, which includes federal aid and an assortment of revenues that are reserved for specific programs, such as gasoline tax collections and hunting license fees. The Legislature's total budget for the 2011-13 biennium is $9.92 billion, an increase of 12.2 percent.

Dalrymple and the Legislature's GOP majority leaders, Bismarck Sen. Bob Stenehjem and Fargo Rep. Al Carlson, are also praising the new budget plan's money reserves, even though the Legislature can't access most of the cushion for six years.

A summary compiled by Dalrymple's office lists just over $1 billion in reserves as being part of the newly written 2011-13 budget. Most of the money will be stashed in the Legacy Fund, which North Dakota voters created last year as a repository for a share of the state's oil tax revenues, and the Budget Stabilization Fund, which can be used only if state tax collections fall short.

The Budget Stabilization Fund, which is expected to have $386.4 million by June 2013, can be accessed if legislators change the rules for doing so.

However, the Legacy Fund, which is expected to have almost $620 million in June 2013, cannot be touched until 2017. The rules for spending money from the fund are part of the North Dakota Constitution, which cannot be changed without voter approval.

"That will create a different sort of perspective two years from now," Dalrymple said. "But I believe that we have enough optimism in this Legislature, and enough confidence in where we're going in the next two years, that they felt they absolutely could sustain this budget."