The Ending Fund Balance: A Moving Target

For advocates, understanding the state’s budget is crucial to their work. Therefore, it can be maddening when budget information tends to shift like sand under out feet.

So it is with the ending balance of the general fund. In September of 2012, the Office of Management and Budget forecast the general fund ending balance (surplus) for the 2013 biennium at $1.6 billion. However, less than three months later, the Governor’s proposed budget estimated the ending fund balance of the general fund for the biennium would be $69 million.

That is a whopping difference of over $1.5 billion and a whole lot of money to take off the table before the legislative session even started.

Now that the legislature is underway, some policymakers are using the deflated number as an excuse to turn back legislation that would tap into that surplus in order to address the growing number of low income North Dakotans.

Why does it make a difference and where did the money go?

The short answer for why it makes a difference is that the general fund is where policy makers and advocates direct their attention when making determinations about how the state’s tax dollars should be allocated. When the surplus available to policy makers for the upcoming session is no longer available, or greatly reduced, that changes the debate and the viability of spending bills brought before the Legislature.

Granted, this isn’t the first time the balance of the general fund has been manipulated to control the outcome of spending bills. Last session, legislators manufactured a general fund “deficit” to deter spending, while at the same time enacting over a half billion dollars in tax reductions and exemptions. 

That deficit, in hindsight seems preposterous since at the end of the 2009-2011 biennium, the general fund balance for the biennium was $997 million: the highest end-of-biennium balance in North Dakota history, both in nominal terms and as a percent of the appropriated budget. 

Where did the 2011-13 biennium surplus go?

Again, the short answer is that it hasn’t gone anywhere, yet. What the governor proposed in his budget would use the current surplus to pay for items that would normally be paid for out of general fund revenues in the next biennium.

For example, the Governor proposed increased transfers from the general fund to the highway fund ($620 million) and the housing incentive fund ($30 million) and the 2013-15 transfer to the property tax incentive fund ($372 million) are all being counted against the 2011-13 general fund surplus balance instead of being considered a general fund expenditure for the next biennium.  

No one would argue these expenditures are not legitimate and important investments for our state. They are. However, by pulling this fiscal maneuver, it insinuates that the spending depletes our state’s resources and, therefore, deters any additional investments in our state’s people.

This gambit actually serves two purposes. It reduces the amount of the surplus that many are lining up to spend this session and it shifts necessary and legitimate spending to this biennium rather than the next so budget hawks may claim moderate increases in spending for the coming biennium. The really disturbing part of all the money shuffling is that it may pave the way for more unnecessary tax breaks later this session.

Instead of having open debate about the needs that exist in this state and what our priorities for allocating the abundant resources of our state should be; legislative leaders and the governor are manipulating the outcome by the ridiculous assertion that there is no money for other necessary spending.

And, of course, they can do it.  Veterans to the process know legislators can do anything they want if they have the votes. Is it right and honorable? No. It’s tricky and disingenuous. But, that is the cost of elections.

Legislative veterans also know that following the state’s budget is a challenge because changes can and do happen right up until the closing gavel. That is to be expected. However, as advocates, we need to be aware when information is massaged, (or even manipulated) to tell a story that limits honest dialogue.

And more importantly, we need to stand ready to call their bluff.



Author: April Fairfield, North Dakota Economic Policy Project