BISMARCK, N.D. (AP) — An updated revenue forecast unveiled Tuesday shows North Dakota’s treasury expects to collect about $1 billion more in oil taxes over the next two-year budget cycle than what lawmakers expected just two months ago.
The forecast from state budget analysts and Moody’s Analytics predicted a nearly 30% increase in oil prices than what the GOP-led Legislature used as a budgetary starting point in January.
Later Tuesday, the Legislature’s budget consultancy, IHS Markit, also predicted slightly higher oil prices and production over the next two-year budget cycle than the state forecast, but was largely in line with it. Lawmakers hired the Colorado-based firm in 2017 to give the Legislature a second opinion on state revenue forecasts, which had missed the mark by hundreds of millions of dollars in some years.
Lawmakers will consider both forecasts to set the final numbers Thursday when they begin finishing their work on the state’s 2021-2023 spending plan. The Legislature has idled major spending bills until the new economic assumptions adopted.
Lawmakers have typically split the difference in the forecasts as their blueprint.
House Appropriations Chairman Jeff Delzer said the oil outlook is “a little aggressive,” but not hugely out of line.
Budget writers in the Legislature have typically split the difference.
Oil prices are a key contributor to the wealth of North Dakota, the No. 2 oil producer behind Texas. State budget officials estimate every dollar that a barrel of oil either increases or decreases has a more than $40 million impact on the state treasury annually.
Lawmakers assumed oil prices at $40 a barrel when crafting their budgetary starting point in January. Moody’s updated forecast assumes oil prices will reach $53.50 in 2022 and $48.75 in 2023.
IHS presented low, high and a baseline that ranged between about $55 to $60 a barrel.
North Dakota crude was fetching about $64 a barrel on Tuesday.
Moody’s expects oil production to remain flat at 1.1 million barrels daily for the next two-year budget cycle, while IHS predicted output at between 1.2 million and 1.3 million barrels daily during that time.
The state’s current two-year budget, including federal aid, is $14.7 billion. The budget represents about $4.9 billion in state general fund spending for the 2019-21 budget cycle that ends June 30.
The general fund portion of the budget is spent on an assortment of programs, including education and human services. It is funded largely by state taxes on income, sales, energy, tobacco and gambling.
The two forecasts were within $19 million in expected revenue from major tax sources, at just more than $3 billion for the next two-year cycle.
