North Dakota Budget Forecast Revisions
I’ve talked about this on the radio for the last few weeks already, and talked to national media about this too. I thought I would just briefly mention here some of the items people should be looking at with these budget revisions. Here is a link to the announced revisions to the document.
The forecast contribution of oil and gas taxes to the general fund are not being revised at all. There is a reduction in their contribution to the legacy fund, so those taxes collections do suffer some in the new model. The big reductions come in the areas of sales and use taxes and corporate income taxes.
Clearly these areas suffer as a result of oil price declines to a significant extent, but the projected decline in those two areas are just short of $1 billion! The downward revision is 25.9% in projected sales tax collections and 54.5% in projected corporate income tax collections. The major hit to the general fund is coming in areas that likely grow in response to oil activity, higher incomes from oil jobs provide workers with the ability to buy more goods and pay more sales taxes, but really only up to a point. However, I worry there was a failure to recognize one time purchases and that past amounts were likely to come down eventually, and that the process accelerated due to the collapse of oil prices.
As a teacher and practitioner of forecasting I try to have some professional courtesy in these situations, but these were enormous misses that suggest a need to overhaul process, or listen to more than one voice when it comes to important things like forecasts of revenues.