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North Dakota governor orders cuts amid $1B budget shortfall

BISMARCK, N.D. – North Dakota Gov. Jack Dalrymple on Monday ordered deep cuts to government agencies and a massive raid on state savings to make up for a more than $1 billion budget shortfall due to depressed crude prices and a drop in oil drilling.

The state had more than $2 billion in various reserve accounts just one year ago, but oil prices — a key contributor to the state’s wealth — have taken a nosedive in the past year. The Legislature’s record-high $14.4 billion budget for the two years that began July 1 was built on oil prices and economic assumptions that have fallen “much greater than anyone would have predicted,” the governor said.

“After 15 years of receiving almost entirely good news about the growth in revenues for North Dakota, it seems strange to hear that things have gone in the other direction,” the Republican told state agency officials at the state capitol in Bismarck.

To balance the budget, Dalrymple ordered agencies to cut their budgets by 4.05 per cent, which will save the state about $245 million through the spending cycle. The governor also will take more than $497 million from the state’s Budget Stabilization Fund, a surplus stash of cash that has been built up over the past decade largely from past oil bounty. That fund will now have a balance of about $75 million.

Dalrymple is only the third governor to tap the fund. Then-Gov. John Hoeven used it in 2002, and former Gov. George Sinner did so during the 1980s, due to depressed prices for crops and oil.

The remainder of the shortfall will be made up by using the previously anticipated ending fund balance of about $331 million.

Still, North Dakota will have about $875 million in surplus cash in various reserve accounts, according to Pam Sharp, the state’s budget director. And that doesn’t include the oil tax-funded “Legacy Fund,” which holds more than $3.5 billion. The fund was approved by voters in 2010, and receives 30 per cent of the state’s oil tax collections, though none of the money can be spent until 2017.

North Dakota became the nation’s second top oil-producing state, behind only Texas, thanks to the booming oil patch in the western part of the state. A one-time spending spill signed by Dalrymple last February fast-tracked $1.1 billion for highways and communities affected by the state’s exploding growth, nearly depleting the Strategic Investment and Improvement Fund, which is funded in part with oil and gas taxes. Most of the money was spent in western North Dakota, which has been overwhelmed with spending needs on roads, utilities, housing and schools.

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This story has been updated to correct the spelling of the former governor’s last name to Hoeven, instead of Hoven.