Government and Politics
December 7, 2022
From: North Dakota Governor Doug BurgumBismarck, N.D. – Governor Doug Burgum on Dec 7th, delivered his 2023-25 Executive Budget Address to the 68th Legislative Assembly, presenting a strategic budget that includes nearly $170 million to address the state’s workforce shortage, increased support for K-12 education and teacher salaries, and over $3 billion for roads, bridges, water projects and other critical infrastructure – all while cutting individual income taxes to save taxpayers an estimated $500 million over two years.
“Today, as we find ourselves in competition with every other state for attracting capital and talent, we need a comprehensive, strategic budget that builds upon our competitive advantages, supports families and communities, attracts and retains a thriving, healthy, well-educated citizenry, and sets North Dakota up for long-term success in the realities of the 21st Century economy,” Burgum said to a joint session of the Legislature, which met this week for its organizational session before the regular session convenes Jan. 3.
“Our strategy-driven executive budget leverages investments in infrastructure, community and economic development for the future and reduces taxes for workers while tackling our No. 1 barrier to economic growth, our workforce challenge,” he said.
The state’s financial position is strong and its reserves are full, with $718 million in the Budget Stabilization Fund, a projected $1.1 billion unassigned in the Strategic Investment and Improvements Fund (SIIF), over $1.4 billion expected in the general fund’s ending balance by June 30, and an estimated $486 million in Legacy Fund earnings.
With those backstops in place, Burgum is proposing a general fund budget for 2023-25 of just under $5.9 billion, which is $162 million less than the general fund budget when he and Lt. Gov. Brent Sanford took office in December 2016. A huge influx of federal and special funds, formula-driven increases and historic inflationary costs push the total budget proposal to $18.4 billion.
Surrounding states have proposed similar budget increases: 9.1% in Montana, 12.7% in Idaho and 11.6% in South Dakota. North Dakota’s proposed total budget increase is 8.9% compared with the original 2021-23 total budget of $16.9 billion, or a 3.4% increase compared with the total budget of $17.8 billion after including appropriations from the November 2021 special session. Approximately 56% of North Dakota’s budget is driven by funding formulas established to support education, the long-term care sector and Medicaid.
Addressing workforce
The proposed budget calls for a $167 million comprehensive package across multiple agencies and programs to address the workforce shortage in North Dakota, which has an estimated 35,000 job openings and the nation’s third-lowest unemployment rate. The package includes:
Even with these and other investments, the executive budget forecasts that by the end of next biennium on June 30, 2025, fund balances are projected to be $410 million in the general fund and $602 million in the state’s rainy day fund, the Budget Stabilization Fund.
“We are fortunate to be in a position to make investments in our state’s future. The bottom line is that our state is doing extremely well. And when the state is doing well, citizens should share in that prosperity,” Burgum said.
Historic income tax relief
The governor highlighted a proposed income tax relief plan, first released in August, that will eliminate the state individual income tax for three out of five North Dakota taxpayers. Those who will still pay income tax will see their liability reduced by roughly one-quarter to one-half, allowing North Dakotans to keep more of their hard-earned money – an estimated $250 million per year – to offset expenses and invest in their families and communities.
The plan will make North Dakota the lowest flat-tax state in the nation and help the state compete against other states for workers, Burgum noted, expressing his gratitude to Tax Commissioner Brian Kroshus, Reps. Craig Headland, Glenn Bosch and Jason Dockter, and Sens. Scott Meyer and Jordan Kannianen for their leadership and partnership on this proposal.
“With inflation putting pressure on household budgets, this proposal will support working families – those who own their homes and those who do not yet but aspire to home ownership,” he said. “To show working families that we understand their plight and that tax relief is a priority for this assembly, we urge you to expedite this income tax relief legislation and make it one of the first bills to cross my desk. Now is the right time to provide a meaningful, permanent income tax cut to make our state a more attractive place to work and a more affordable place to live.”
Investing in infrastructure
Promoting economic development and creating healthy, vibrant communities is only possible if you have the infrastructure to support it, and the state has made great strides in recent years, including the historic bonding bill approved last session, Burgum said.
The 2023-25 budget proposal addresses aging roads, bridges and other infrastructure with an unprecedented $2.4 billion investment. This includes $1.2 billion in federal funds from the Infrastructure Investment & Jobs Act and $1 billion in special funds that includes a $300 million one-time allocation from SIIF, and a $125 million one-time investment from the general fund.
The budget also invests over $600 million through the Department of Water Resources to keep making progress on flood protection projects in Minot, Valley City and Mandan; to continue advancing large regional water systems like the Northwest Area Water Supply, Southwest Pipeline, and Red River Valley Water Supply; and to address other critical water supply infrastructure needs for municipal and rural systems.
Other infrastructure items in the budget include:
Promoting quality education
To continue robust support for quality K-12 education in North Dakota, the budget recommends increasing the per-pupil rate for education aid by 4% in the first year of the biennium and 3% in the second year, bringing these formula payments to record levels.
And, like last session, the budget proposes that school districts be required to spend at least 70% of new dollars for K-12 on compensation for educators.
The budget also recommends accelerating the multiyear shift to on-time K-12 funding to ensure that growing school districts are being funded based on the current year’s enrollment instead of the previous year’s enrollment, and that the state isn’t paying for “phantom” students in districts with enrollment declines.
For higher education, the budget includes $50 million in funding for challenge grants, which must be matched 2-to-1 with private sector funds, for a total investment of $150 million. Since its inception in 2013, the state has invested $72 million into the challenge grant program, which has resulted in a combined public-private investment in higher education of $221 million for scholarships, research, endowed chairs and other items.
Burgum also urged lawmakers to provide authority to borrow from the Bank of North Dakota to honor the state’s commitment to funding career academies where high school students can pursue high-demand careers in the trades, technology and other sectors. The 2021 legislature appropriated $88 million in federal funds to be matched by private sector, but the U.S. Treasury has yet to release the dollars.
“To address our immediate workforce challenges, it’s critical that we don’t allow federal inaction to delay our state’s progress,” he said.
Building healthy, vibrant communities
Burgum highlighted the need to invest in North Dakota’s communities, recreation and tourism, including the Energize Our Communities plan announced in October to help cities attract new residents and help retain youth and existing workforce.
The budget proposes more than $51 million for state parks and recreational/historical sites, including $9 million to build cabins at state parks, $6 million in grants for local parks and recreation, and $8 million for a new campground at the Pembina Gorge.
The budget also calls for a Destination Development Fund of $50 million would be matched dollar-for-dollar by private or non-state sources to build or expand unique attractions.
The budget also includes:
Supporting state team members
To attract and retain state team members in an increasingly competitive market and during this time of high inflation of wages and services, the proposed budget includes a competitive total rewards package.
The package includes $90 million in targeted pay equity funding based on a data-supported analysis to bring targeted agency salaries, including higher education, closer in line with the overall market. A total rewards task force found that state government compensation is up to 10% below what some North Dakota counties and cities are offering, and recent increases given by other states and cities are higher than the 2% given to North Dakota state team members this biennium.
In addition to the targeted pay equity funding, the budget recommends performance increases of 6% in the first year of the biennium and 4% in the second year, representing a $211 million investment that will make the state more competitive when trying to recruit for critical positions.
The strategic budget review process also identified the need for additional full-time equivalent (FTE) positions in priority areas to deliver the level of service that North Dakota citizens expect and deserve. Despite population growth, the state currently has 125 fewer FTEs in state government, not counting higher education, than when Burgum and Sanford took office in 2016. The executive budget recommends a 3.1% increase in FTEs across state government and higher education – in many cases bringing staffing levels back to pre-2015-17 budget reduction levels.
Supporting health care and human services
The budget invests over $30 million in behavioral health, with additional FTEs for more peer support specialists and mobile crisis services. This includes increasing funding for Free Through Recovery by $8.3 million, to $15.5 million, and for Community Connect by $7.1 million, to $15 million, allowing these programs combined to serve nearly 3,000 North Dakotans.
The budget also funds a proposed Child Protection Response Team that can be deployed quickly to provide short-term, targeted, frontline staffing capacity in Human Service Zones experiencing challenges created by staff turnover. The fully trained team managed by Child and Family Services will allow the state to better deliver services to at-risk children, even in the face of short-term, localized staffing crises. Domestic violence and abuse prevention and treatment programs also would receive a $3.4 million increase.
Funding also is provided for four permanent tribal health liaisons to assist the Department of Health and Human Services with responsiveness and support for tribal health needs, as well as $15 million to enhance home and community-based care services for older adults and people with physical disabilities.
The governor's budget address and PowerPoint presentation will be posted with the executive budget on the Office of Management and Budget's website.