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Omdahl: Oil, ag are volatile sectors

By Staff | Mar 27, 2015

Policymaking in Bismarck just became more “iffy” with the news that the country is producing and importing one million more barrels of oil daily than it is consuming. Available storage is rapidly disappearing.

According to Ed Moss, head of commodities research at Citibank, this growing oil glut could plunge oil prices as low as $20 a barrel in the next couple of months. Some other analysts agree.

At $20 a barrel, oil exploration and production in North Dakota’s Bakken would grind to a halt, resulting in a bust that would devastate the region. The new man camps, motels, restaurants and auxiliary businesses would suffer incredible losses.

Since the beginning of the legislative session, legislators have been revising revenue estimates on a weekly basis. Even the official estimates issued last week are unreliable, meaning that the entire state budget will remain volatile until the day of adjournment and will continue erratic throughout the entire 2015-2017 biennium.

While the Legislature is struggling with the volatility of the oil industry, another variable clouds the horizon. According to U.S. Drought Monitor, a consortium of weather scientists, North Dakota is abnormally dry with moderate drought in some areas. That is not news to many farmers and ranchers.

Agriculture production is the other major contributor to the North Dakota economy and it is dependent on capricious weather patterns. Unreliable production can have a major impact on farm income and state revenue.

Even though two-thirds of the state’s economy is based on fickle oil and agriculture, the Legislature must estimate state revenue as far as 26 months into the future.

Up until this point in history, the Legislature has been able to run the state with a biennial budget only by creating all sorts of scenarios and triggers to deal with those scenarios. For interim decisions, it has a 50-member interim budget committee making decisions that rightfully belong to the full assembly.

Only Montana, Nevada and Texas share the biennial legislative schedule with North Dakota. Even Wyoming and South Dakota have gone to annual meetings.

Because a large oil state like Texas can get by with a biennial session, some think that North Dakota should be able to hobble through.

I don’t know how many triggers Texas has contrived in its budget but hardly a year goes by when it isn’t holding a special session. In one biennium, Texas needed five special sessions in addition to its regular 140-day meeting.

Even if we disregard the volatility of the oil and agriculture sectors, many other issues – especially federal funding – are moving too fast to be handled rationally by a 1889 biennial process. In every session, we sweep more problems under the rug than we solve. Biennial has become a synonym for indecision.

As previously mentioned in this column, the Legislature already has the option of using the flexible 80-day schedule proposed by the 1972 constitutional convention and subsequently adopted by a vote of the people in 1976.

By separating plenary sessions and committee hearings, legislators would gain a substantial number of additional days and improve the quality of its deliberations. It could respond more effectively to contemporary issues.

This flexible schedule has been available for 39 years. No new amendments are necessary. With the 80-day schedule already in the constitution, it could now have two annual sessions, four 20-day sessions, eight 10-day sessions, or whatever schedule it wished.

It’s time to admit that we are now an adult state with grown up problems that require more than makeshift solutions and interim band aids.

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