North Dakota is preparing for a challenging financial landscape with the upcoming 2027-29 budget projected to be as much as $800 million less than the previous biennium. According to Allen Knudson, a budget analyst for the North Dakota Legislative Council, preliminary estimates indicate that revenue for the general fund budget will be between $700 million and $800 million lower than the 2025-27 biennium budget.
The beginning balance for the general fund is expected to be approximately $300 million, a significant decrease of $1 billion compared to the previous biennium. Knudson noted that the uncertainty surrounding revenue forecasts for the current biennium adds to the complexity of the budget preparations. Factors contributing to this decline include a slowing economy and lower oil prices, which are vital to the state’s revenue stream.
Impact of Economic Trends on State Revenue
The state’s financial outlook has been further complicated by changes implemented during Donald Trump’s presidency, particularly through the One Big Beautiful Bill, which may lead to a tax revenue loss of $130 million this biennium. Joe Morrissette, Director of the North Dakota Office of Management and Budget, explained that the exclusion of taxes on tips and overtime has adversely affected state tax collections, stating, “Good for the taxpayers, bad for the state budget.”
Despite these challenges, Morrissette does not anticipate “across-the-board” cuts to state government but acknowledges the need for fiscal prudence. His office is engaging with various agencies to explore potential spending reductions in preparation for what is expected to be a difficult budget cycle ahead. “Next biennium, if we just meet our forecast, it’s going to be something less than what we’re currently spending,” Morrissette added.
Governor Kelly Armstrong emphasized the proactive measures being taken by his Cabinet to address the budgetary constraints. In light of the anticipated financial challenges, he has instructed agencies to refrain from creating new full-time positions or programs. “Government has to grow to catch up, but our current growth of government is also unsustainable,” Armstrong remarked, reflecting on the rapid expansion of government services in response to an oil boom that significantly increased North Dakota’s population.
Future Budget Strategies and Considerations
The budget process for 2027-29 is seen as an opportunity for state administrators to reevaluate government operations. Armstrong indicated that his Cabinet will assess the efficiency of government functions and determine which programs yield valuable outcomes. This approach is intended to foster thoughtful decision-making in the face of dwindling resources.
The previous biennium’s budget, approved last year, reached a record of nearly $20.3 billion, marking a 3% increase from the 2023-25 biennium and a staggering 50% increase from the 2013-15 budget period. Approximately 9% of North Dakota’s general fund revenue derives from oil taxes, which have recently trended downward. The state previously forecasted oil prices to remain between $57 and $59 per barrel; however, current prices are closely aligning with these estimates.
Morrissette indicated that while revenues are not necessarily declining, the absence of a substantial surplus from the previous biennium will impact future financial planning. The state’s Budget Stabilization Fund, often referred to as a “rainy day” fund, currently holds $938 million and may be utilized should budget shortfalls arise. Morrissette clarified that accessing the fund is rare and typically reserved for significant financial crises. “We made it through COVID without ever tapping into the Budget Stabilization Fund. It has to be pretty drastic, but it’s part of the process,” he noted.
As North Dakota prepares to navigate the complexities of its upcoming budget, the focus will remain on ensuring fiscal stability while meeting the needs of its citizens. A new revenue forecast is anticipated in March, which is likely to confirm further adjustments to the state’s financial outlook. In the interim, state agencies have been reminded to exercise caution in their spending practices and evaluate the necessity of filling unoccupied positions.
The challenges ahead will require careful planning and strategic decision-making as North Dakota works to balance its budget amid changing economic conditions.
