JBC staff outline severance tax rebalancing package, seek committee guidance

For the record, Mark Ferrendino, SPV director, told the Joint Budget Committee on Monday that staff are recommending a package of severance-tax related transfers and general fund backstops to maintain core programs while preserving reserves.

Ferrendino said the office's forecast showed "significantly less severance tax than what we had forecasted just 3 months ago," and that the shortfall affects programs that rely on severance receipts. "We have a proposal of what to do," he told the committee, summarizing line-by-line adjustments staff will ask the committee to consider.

The nut graf: Staff framed the request as an attempt to strike a balance between using reserves to keep Department of Natural Resources (DNR) and other programs operating this year and avoiding a long-term erosion of the severance tax operational reserve.

Staff proposals described by Ferrendino included using the DNR operational 200% reserve to fund operations (reducing the reserve toward 100% for the current year), asking the committee not to enact a previously passed sweep of $15,600,000 because that revenue is not expected to materialize this year, and appropriating general fund to preserve water and energy-related project funding.

Key elements Ferrendino described: - DNR operational reserve: use of reserve to continue funding operations this year rather than permanently lowering programmatic baselines. - Water projects: a requested general fund appropriation of about $37.5 million plus expected severance receipts to reach roughly $40 million for water project funding in the current year. - Energy Impact Fund and local impact: staff proposed $25,000,000 of general fund toward an energy impact fund allocation (half of an earlier $55.7 million projection) plus the expected severance receipts to reach approximately $28.2 million total for that purpose. For local impact funds, staff continued to recommend a one-year $10,000,000 DOLA transfer (not the previously proposed $20,000,000 over two years). - Decarbonization transfer/tax credits: staff noted a multi-year transfer (based on prior legislation) that funds tax-credit administration; Ferrendino estimated roughly $2,800,000 of administrative expenses for approved credits and said any remaining funds would flow to the general fund.

Ferrendino summarized the package as "ultimately, it's a $90,000,000 roughly ask, to get to $55,800,000 balancing," and said the forecast that staff presented incorporated that package. He closed by asking the committee to give staff and committee members time to work through the details and invited questions.

No formal committee vote was taken on severance allocations during the hearing; the JBC chair and committee members asked for additional staff work and for time to consider the proposals before decisions are made. Representative Patrick Taggart (Representative Taggart) asked whether the package covers both DNR and DOLA; Ferrendino confirmed it did. Representative Taggart also asked whether the package accounted for funding requests tied to the state's digital trunk radio system; Ferrendino said it did not include that and flagged DTRS funding as a separate continuing conversation.

Ending: Committee staff and members agreed to revisit severance allocations after additional analysis; Director Craig Harper (JBC staff) and Ferrendino said updated figures and staff recommendations would be provided in follow-up materials to allow the committee time to consider the tradeoffs.