Governor Dalrymple called for a special session to deal with revenue shortfalls related primarily to the collapse in oil prices. This session occurs after previously ordering across the board budget reductions and dipping into the budget reserve. Although Republicans have yet to disclose their approach in the special session, it is widely anticipated that their main target to achieve reductions necessary will be to roll back property tax relief (raise property taxes) and cut Higher Education spending.
https://nd46dems.com/wp-content/uploads/sites/5/2016/07/abandoned-well2.jpg 319 375 D46 Dems /wp-content/uploads/sites/5/2016/06/d46demnpl-logo.png D46 Dems2016-07-25 08:52:582016-07-26 14:11:30It’s 1981 all over again
Actions to ‘re-balance’ the state budget come in the wake of a 2015 Republican dominated legislative session that anticipated oil prices (and state revenues) to remain strong. To punctuate their firmly held belief, they increased spending in many areas (some one time, others not) and proceeded to permanently cut taxes for corporate and personal income. And in the final days of the session, they introduced and quickly approved a permanent reduction in the oil extraction tax. Property tax relief was provided to local political subdivisions, but in the form of ‘one time’ expenditures. In other words, they approved permanent reductions in corporate income, personal income, and oil taxes, but provided only ‘temporary’ tax relief for property.
All of this may sound familiar to some older political observers because nearly the same thing occurred in 1981 when Republicans believed the oil party would never end. The 81 session occurred immediately after ND voters approved the infamous Measure 6 that placed a 6.5% oil extraction tax on the wellhead value of oil. While grousing about the voter approved tax measure, Republicans proceeded to INCREASE spending AND dependence on oil tax revenues for education and a host of other services. Meanwhile, they slashed income and sales taxes.
By late 1981, it became obvious that oil price declines were more than a temporary situation. Heading into the 1982 election, Republicans talked openly about the need to cut spending in some areas AND increase income and sales taxes once again. That’s exactly what occurred. The 1983 legislature raised nearly (if not all) of the taxes reduced in the 1981 session.
Fast forward 35 years to 2016. Geopolitical activities have once again pushed the price of oil to lows reminiscent of the 1980s price decline. Republicans are poised in the August special session to cut spending and raise taxes once again. But don’t expect them to recover lost income or oil revenues which primarily were a gift to out of state interests. Instead, they will raise property taxes – the one tax that they steadfastly refused to permanently reform.
It should be noted here that 80s Republicans blamed Measure 6 (the voter approved extraction tax) for the collapse of oil activity in North Dakota. This time, in advance of a collapse, a new generation of Republicans cut the extraction tax. Of course, this tax cut like the tax increase decades before had no influence on drilling activities in North Dakota. Activity is always directly related to the price of oil.