Gov. Burgum outlines record 2-year budget plan for North Dakota, emphasizes workforce, flush finances
Posted 12/08/22 (Thu)
Gov. Doug Burgum on Wednesday sketched out a two-year budget blueprint emphasizing workforce recruitment and retention and North Dakota's healthy financial outlook.
His budget address to the Legislature outlined his proposed $18.4 billion proposal, which includes a $5.86 billion general fund, the state's main operating fund. That would be an overall record budget but includes federal funding and comes amid recent inflation. The 2021-23 budget is $17.8 billion with a $5 billion general fund, including federal coronavirus aid.
The governor noted the state's rosy financial picture, including $3 billion in cash reserves, which allows for myriad one-time projects, and a $718 million rainy day fund. His budget plan also figures a $410 million general fund ending balance when the next two-year budget cycle ends in mid-2025. Better-than-projected state tax revenues, notably oil taxes, created the situation.
Key in Burgum's blueprint is workforce development, initiatives to attract and retain workers in a state with tens of thousands of open jobs.
"Every company, every state is now competing for workforce," he said.
Burgum is pitching a state income tax relief plan on that front, proposing to eliminate state income taxes for lower-earning North Dakotans while shrinking taxes for higher earners to a flat tax of 1.5%, which Burgum said would save taxpayers about $250 million annually.
"The bottom line is our state is doing just incredibly well, but when our state is doing well, our citizens should also share in the prosperity," the governor said.
His budget includes $167 million proposed for workforce development, including his $53 million "ND Works Investment Plan" he previewed this fall.
That plan includes $25 million to expand a state Commerce Department workforce recruitment initiative and Job Service virtual job fairs, and $20 million for a grant program for local governments and economic development groups to address labor demands.
Burgum proposes 4% and 3% increases in 2024 and 2025, respectively, for K-12 per-pupil payments -- with 70% of those increases going toward teacher salaries. His budget includes $2.27 billion for K-12 funding.
The budget includes "on-time funding," or K-12 funding based on current enrollment not previous enrollment. State School Superintendent Kirsten Baesler in a statement said she feels that's important because right now "most state aid per student comes a year late."
The governor also is asking for 6% and 4% performance raises for state employees in the first and second years of the next budget cycle, respectively, costing $211 million, plus $90 million in "targeted equity pay" for boosting salaries to be in line with the overall market, for a total of $300 million.
"At a time when inflation is skyrocketing, our state employees this year are getting a 2% increase," Burgum said of state employees' most recent raise.
The state also would cover the $78 million premium increase for health insurance and make no changes to the existing plan, under Burgum's proposal.
State employee turnover was 14% last year, a 14-year high, according to Burgum.
"It’s more important than ever to develop compensation solutions that attract and retain top talent," he said.
North Dakota United, which represents more than 11,000 public employees and schoolteachers, is advocating for 8% salary increases in each year.
The governor's plan includes a $250 million transfer into the state employee pension fund to address its unfunded liability of $1.86 billion. Two House bills propose the same infusion. Lawmakers the last two years have been preparing to close the state's defined-benefit plan to new hires and move to a defined-contribution plan, or a 401(k)-style plan.
"If we don’t get on the off-ramp from the defined benefits now, this will cost North Dakota taxpayers billions more down the road," Burgum said.
North Dakota United supports keeping the defined-benefit retirement plan, saying "it will be less expensive to fix the plan than to close the plan.”Burgum's budget also includes:
- $2.4 billion toward aging roads, bridges and other infrastructure, with over $1 billion derived from the Federal Bipartisan Infrastructure Law
- $600 million for water projects such as flood protection and regional water systems
- $161 million for a new women's correctional center in Mandan, a new campus at the Youth Correctional Center
- $76 million for programs addressing child care affordability, availability and quality
- $51 million for local parks and recreation grants, state parks and State Historical Society infrastructure
- $50 million for a destination development fund to expand attractions
- $15.5 million of increased funding for Free Through Recovery peer-support addiction services
- $15 million for enhancing home- and community-based care services, including adding more than 12 full-time employees
- $3.4 million for domestic violence and abuse prevention and treatment programs
Republican majority leaders see common ground in Burgum's recommendations.
"It's a very well-done budget, and I think it'll align fairly well with legislative priorities," said House Majority Leader Mike Lefor, R-Dickinson. He cited such issues as tax relief, significant state employee raises, pension reform, workforce and child care.
Senate Majority Leader David Hogue, R-Minot, said the Senate and the governor are "closely aligned" on workforce development. Burgum's proposed state employee raises also are "pretty close to where the Senate will be," he added.
Hogue also noted "alignment" or support for a new women's state correctional facility and a $20 million match for a state military museum.
Burgum's proposals will get serious consideration, Hogue said.
House Minority Leader Josh Boschee, D-Fargo, sees "a lot of things to like" in the governor's blueprint, but also "one-time money." Democrats are "leery" of proposed income tax cuts, he added.
"That is an ongoing form of revenue that we can depend on. Oil and gas fluctuates," Boschee said.
Republicans this fall detailed a plan to use $340 million of earnings from the state's Legacy Fund oil tax savings in the 2023-25 budget cycle for the state to take over more of the cost of K-12 education -- increasing the state share from 72% to 85%, which could help reduce local property taxes.
Hogue said the Legislature might ultimately provide relief for both state income tax and property taxes, but likely not on the scale as proposed.
Leading the Legislature's budget writing will be new House and Senate appropriations committee chairmen, Rep. Don Vigesaa, R-Cooperstown, and Sen. Brad Bekkedahl, R-Williston.
Both panels will have several new members, too, due to significant turnover in the Legislature this year. Forty-one of 141 lawmakers are new members, though some have previously served.
Wednesday was the last day of the Legislature's three-day organizational session. The 2023 Legislature convenes Jan. 3, to last up to 80 days. The 2021 Legislature used 76 days.