Mar 06, 2008 - 04:06:30 CST
If you could cut your state income tax bill in half, would you? And if you could vote to lock away most of the state's oil tax revenues for future generations, would you do that?Don't worry just yet. You have about six months to think it over.
But come the November election, North Dakota voters likely will be facing these decisions in the form of initiated measures.
The first - which is already on the ballot - would enshrine a nearly untouchable Oil Tax Trust Fund into the state's constitution. The idea was dreamed up by conservatives in the 2007 Legislature as a way to ensure that succeeding generations benefit from today's oil windfall.
The second - which is expected to be on the ballot, but isn't officially there yet - is a measure to allow North Dakotans to halve their state income taxes and cut state corporate taxes by 15 percent. It is being pushed by former Republican congressional candidate Duane Sand and Americans for Prosperity, a national taxpayer advocacy group.
Call it the double whammy. If both measures pass, policy makers fear it will severely constrain them during the 2009 legislative session and beyond. It's a prospect that has created an asterisk next to all the sunny revenue projections and predictions of some tough decisions to come.
"It could potentially make us have to cut budgets instead of increase them," said Pam Sharp, who serves as state budget director under Republican Gov. John Hoeven.
About 80 percent of the state budget goes to human services and education, meaning these areas would likely have to be reduced, she said.
State Senate Minority Leader David O'Connell, D-Lansford, said the passage of both "could be a disaster for the state."
"It means a lot of programs would have to be cut, and when programs are cut, that usually means people get hurt," he said.
The numbers tell the story.
By placing a permanent Oil Tax Trust Fund in the Constitution, lawmakers could lose access to much of the oil tax revenue that can be used to fund anything from roads to schools. Instead, lawmakers would only have access to the interest earned on the balance, unless three-quarters of the Legislature voted to access 20 percent of the principal in an emergency.
Using the state's conservative estimate of $300 million in oil tax revenue this biennium, that means it would lose access to $229 million (an initial sum of $71 million is deposited straight into the general fund.) That lost money is roughly equal to 9 percent of the state's total $2.5 billion budget.
If the income tax measure passes, that will take away another $375 million to $400 million, according to estimates from Sharp. That's roughly equal to another 15 percent of the state's budget.
Don Canton, a spokesman for Hoeven, said this situation would make it very hard for the office to fund its priorities such as increasing education funding and cutting property taxes. Hoeven shares the measures' goals but feels they put too much constraint on how those goals are accomplished, he said.
"We're very supportive of tax relief, and we're dedicated to a good reserve," he said.
O'Connell said the state has a lot of catching up to do on neglected areas, such as the state prison and maintenance needs at universities.
Of course, you have the final say.
(Reach reporter Jonathan Rivoli at 223-8482 or jonathan.rivoli@bismarcktribune.com.)
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