Leadership Division reviews fiscal outlook, flags gap between ongoing revenue and spending

The Leadership Division of the Budget Section 2 Committee reviewed the state’s fiscal outlook and 2025–27 budget, hearing that ongoing revenues trail projected ongoing spending and that oil, interest and special-fund transfers remain key drivers of the totals.

Alan Knudson, Legislative Council staff, told the committee the total budget shown for 2025–27 is about $20,300,000,000 and that the general fund beginning balance entering the biennium was lower than the prior cycle, down to roughly $1.2 billion from about $1.5 billion. “Ongoing general fund spending is about $784,000,000 more than our ongoing revenues,” Knudson said.

The presentation compared major revenue lines across recent bienniums and noted transfers and beginning balances have been a large part of budget balance historically. Knudson said recent transfers included a roughly $250,000,000 transfer of legacy fund earnings into the general fund in 02/2025 and a $50,000,000 transfer from the CIF. He also told the panel that interest income projections declined compared with the previous biennium because “projections are that interest rates will probably drop a little bit.”

Knudson walked members through major appropriation categories: health and human services (about $2.2 billion), K–12 (about $1.7 billion), higher education ($885 million) and corrections (about $344 million). He said ongoing general fund appropriations increased roughly 4.6% in the current budget cycle, while total appropriations increased about 2%.

Members pressed staff on particular revenue swings. Knudson confirmed April collections were about $100,000,000 higher than the revised forecast approved in March, split roughly evenly between individual and corporate income taxes. “We were over the revised forecast that you approved in March, we were up about $100,000,000 in April,” Knudson said.

Committee members also raised cash-management and interest-return questions. Chairman LaFoure said he had asked the Bank of North Dakota to speak at a future meeting; the committee discussed inviting the bank plus the state treasurer and Rio (the state investment office) to explain recent returns and cash-management practices.

Knudson noted transitions in funding sources: federal COVID-era funds have largely ended (contributing to a decline in federal funds), while special funds grew because of items like Foundation Aid Stabilization Fund support for K–12 and legacy fund earnings used for the primary residence credit.

The committee heard that some one-time or transfer items were excluded from the topline due to a governor veto under review. Knudson said questions about a $10,000,000 housing incentive appropriation remain unresolved pending legal review: “So as of now, we're not including the $10,000,000 just so that's clear.”

Discussion and direction: the committee asked Legislative Council to provide further breakdowns (including counts of individuals receiving health services and more detail on FTE changes), and asked staff to invite Bank of North Dakota and other cash-management actors to the next meeting. Knudson said more detailed after-session books will be finalized after legal and veto issues are resolved.

Looking ahead, Knudson told members the state’s legacy fund balance estimate as of June 30, 2027, would be a little over $14,000,000,000, and that the SIF (Strategic Investment Fund) and budget stabilization balances were available as cushions. “If the forecast would be right on target, we would have about $230,000,000 in the general fund to cover a potential need of 700,000,000 going forward,” he said, noting SIF could also be used if needed.

The committee took no formal fiscal votes; members directed staff follow-ups and set presenters for future meetings.