North Dakota is preparing a two-year budget that may see a reduction of between $700 million and $800 million compared to the current biennium. Budget analyst and auditor for the North Dakota Legislative Council, Allen Knudson, indicated that the projected beginning balance for the 2027-29 general fund budget will be $300 million, which is $1 billion less than the beginning balance for the 2025-27 biennium.
According to Knudson, the state’s financial outlook is uncertain. He stated, “The unknown, however, is whether revenues for the remainder of this biennium will meet the revenue forecast or be more or less than the forecast.” The state has been affected by a slowing economy and lower-than-anticipated oil prices, impacting projected revenues.
The implications of federal tax changes from President Donald Trump’s One Big Beautiful Bill could further exacerbate the situation, potentially leading to a tax revenue loss of $130 million this biennium. Joe Morrissette, Director of the North Dakota Office of Management and Budget, noted that this change affects state tax collections, stating, “Good for the taxpayers, bad for the state budget.”
Budget Management Strategies
Morrissette does not foresee “across-the-board” cuts for state agencies but emphasized the need for cost-saving strategies. His office is currently engaged in discussions with all agencies to prepare for what is expected to be a challenging budget cycle. He acknowledged that if the state meets its revenue forecasts, the spending will be less than the current budget, prompting discussions around necessary budget reductions.
Governor Kelly Armstrong has initiated budget preparations months in advance. He informed state agencies not to create new full-time positions or programs as part of a strategic reset following the rapid growth of government in response to the oil boom over the past two decades. “Government has to grow to catch up, but our current growth of government is also unsustainable,” he stated.
This new budget cycle presents an opportunity for state administrators to reassess government efficiency and evaluate the effectiveness of various programs. “That’s how you do this,” Armstrong emphasized.
Historical Context and Future Projections
The North Dakota Legislature approved a record budget of nearly $20.3 million for the 2025-27 biennium, marking a 3% increase from the previous biennium and nearly 50% from the budget of 2013-15. Oil taxes contribute about 9% of North Dakota’s general fund revenue, with projected oil prices anticipated to remain between $57 and $59 per barrel. However, recent trends show a decline in oil prices, which Morrissette noted are closely following the forecast.
Despite the challenges, Morrissette stated that revenues are not necessarily declining, with the expectation of continued growth. The previous budget benefited from a substantial surplus due to revenues exceeding forecasts, a situation not likely to recur in the upcoming biennium.
The Office of Management and Budget has also proposed a voluntary separation incentive program for state employees nearing retirement, offering three months’ worth of pay. As of the February 6 deadline, 17 employees expressed interest in the program, while 21 opted out.
Morrissette is advising agencies to exercise caution in spending, emphasizing the importance of evaluating open positions and only utilizing necessary funds. A new revenue forecast is expected in March, which is likely to reflect lower-than-anticipated revenues.
The state’s Budget Stabilization Fund, commonly referred to as the “rainy day” fund, currently holds $938 million and could be utilized to address potential budget shortfalls. Morrissette remarked, “That doesn’t happen very often,” highlighting that the fund remained untapped during the COVID-19 pandemic.
As North Dakota navigates these financial challenges, officials are focused on implementing thoughtful decisions that will shape the state’s fiscal future.
