The 64th Legislative Session began Jan. 6, and has been progressing since. Our bill deadline was passed this past Monday. A total of 492 bills and resolutions were introduced in the House. This compares with 482 in the last legislative session.
With the decrease in oil prices, the revenue forecast is the main concern at this point in the session. North Dakota has two triggers that are in place regarding the oil extraction tax. Our current extraction tax of 6.5 percent will most likely decrease in the next few months. The small trigger is implemented on new wells when the West Texas Crude price is less than $57.50 for a single month. That most certainly will be reached at the end of January and will continue until June 30, unless that is extended by the legislature. The estimates that I have include a $170,000/well loss of revenue for a total of $120 million to $150 million.
The large trigger is a five-consecutive monthly average of oil prices at a price $52.50/barrel or lower. When that occurs, which could be as soon as the end of May, the extraction tax is lowered from 6.5 percent to 4 percent on wells in the first 24 months of production. For wells beyond the first 24 months of production drilled after April 27, 1987, the tax rate drops to 4 percent as well. For new wells that come into production after the trigger is implemented, the tax rate is eliminated for up to 24 months.
As you can tell, if this occurs, significant budget ramifications will be the result. The executive budget based its projections on a $74-$82 price and a total of $8,322,330,000 for the biennium. If, for example, the price of oil is reduced to a $34-$42 range, the revenue generated is reduced to $2,171,460,000. This would have very significant effect on trust funds that create revenue that is used to fund water projects, strategic investment and improvement fund, property tax relief fund, outdoor heritage fund, the state general fund, as well as several more. Sales tax, income tax and corporate income tax projections will be affected as well with this downturn, as will the number of job openings in the state.
As we go forward in this session, we will need to be very prudent in our deliberations regarding one-time funding projects. If there are reductions that need to be made throughout the budget, I will be watching the process very carefully to make sure that this is done in an equitable way. Road construction, primary and secondary school funding and property tax relief remain a priority for me, personally, as well as the legislature as a whole.
I will report in subsequent reports as to the progress we are making in this regard and hopefully we will begin to get a better handle on the overall revenue picture at the end of next week. Feel free to contact me at the Capitol at email@example.com or call the Capitol with any concerns at 1-888-NDLEGIS.
Rep. Jon Nelson, R-District 14
Another week has flown by and the bill filing deadline has come and gone. The actual number of bills introduced in the Senate is now at 378 and the actual number in the House is at 474. That would give us a total of 10 additional bills over last session.
The Senate Finance and Tax Committee has a total of 34 bills to review. These bills range from lowering or eliminating income tax to changes in property tax to additional reductions in sales tax. While there are a lot of good ideas within this group, the Senate will work its way through these issues and find which will fit into the budget.
Speaking of the budget, while oil prices continue to stay low, the legislature has moved very slowly in the budgeting process. Any analysis of our revenue has been prepared by our in-house financial analysts and that report was given to the legislative body Thursday. At that point, we believe we can move forward preparing and passing budgets in this first half of the session. Another report will be done in March by Moody’s Analytics, the state’s paid professional analysts, in determining all our revenues for this next biennium.
We will have a lot of issues that will come and many that will go or be changed as we work through this process. Keep in touch.
Sen. Jerry Klein, R-District 14
Please Enter Your Facebook App ID. Required for FB Comments. Click here for FB Comments Settings page