2005-2007 Budget Guidelines Address

Governor John Hoeven
March 22, 2004

Good morning and thank you for being here.

It may be hard to believe, but that time is here again. Today, we establish budget guidelines for the 2005-2007 biennium. We must again demonstrate to the people of North Dakota that we are good stewards of their money, and do all we can to continue to provide them with quality services.

I would like to compliment all of you on how well you have met that responsibility in the past, and I ask that you continue to fulfill that trust now and in the next biennium.

Looking back on a difficult economic period for our nation, North Dakota can feel pleased that we have fared better than most states during the recent recession. We are gaining jobs; our wages and income are rising faster than the national average; and we are even seeing signs of improvement in our population trend. We are reversing our outmigration, and last year, for the first time in a generation, births relative to deaths rose in North Dakota.

On the budget front, we are one of only three states nationwide to go through the recession without a deficit, and while other states raised taxes by almost $10 billion, we funded our priorities, like K-12 education and healthcare, without a tax increase.

Also, our prospects for the future look good. Revenues are exceeding projections by about $13 million to date, and right now, we anticipate a budget surplus. In addition, we have $50 million in federal fiscal relief that we must steward carefully because it is one-time funding. We must budget it wisely, so that it continues to benefit North Dakota citizens for many years to come.

We have managed to build our state and its economy in spite of a recession for several reasons. One is an agenda that is aggressively seeking to create jobs and build businesses in our state. Over the past three years, we have created more than 5,000 new jobs in North Dakota. We have done so while other states, including Minnesota, South Dakota and others in the Midwest, have lost jobs. New jobs and businesses produce new wealth for North Dakota, and that means more resources, without new taxes, to serve our people.

The second reason we have been able to maintain a healthy economy in difficult times is your good stewardship of the taxpayers' money. Two years ago, I stood on this very spot and I called on all state agencies to develop a 95 percent base budget for the 2003-2005 biennium.

We saw the fruits of that effort in a balanced budget; continued, quality services; and no new taxes. That 95 percent budget helped to free up enough general fund dollars, which when combined with other adjustments, covered the cost of increases for crucial expenses and programs, such as Medicaid, disaster relief, health insurance and teacher salary increases that are now carrying over into the next biennium. That means that in the coming biennium, we will be able to do more for our people.

Today, I am calling on you to develop a 100 percent budget for the 2005-2007 biennium. That's good news, because this is only the second time in ten years that we haven't had to call for less than 100 percent budget. We must still find efficiencies and savings, but we will then use those savings and our budget growth to fund our priorities in education, healthcare and economic development.

Last legislative session, as we recommended, the state absorbed a 20 percent increase in health insurance premiums for state workers. That's good, but we budgeted and pushed for a three percent public employee salary increase, which did not pass. A 100 percent budget will also allow us the room we need to provide a public employee salary increase. Our state employees, all of you, do a fine job for the citizens of North Dakota. You deserve a pay increase, and we will again build one into the budget.

At the same time, over the next few months, I challenge you to look closely at your spending, identify inefficiencies, prioritize your programs and implement savings wherever possible. I am asking you to examine programs and activities to determine how well they serve the people of North Dakota, and base your budget decisions on those criteria. If you are looking at new programs, you need to weigh their effectiveness against programs we already have in place.

All agencies need to look at their budgets - regardless of funding source. Whether you are funded from the general fund, special funds or federal funds, we need to ask some pointed questions: First, are we doing things as economically as possible, and second, could we be doing things better? Remember, too, that federal or special fund savings in the administrative area can be redirected into programs or grants, which provides more service and value for the citizens of North Dakota. Within the next few weeks, your OMB budget analyst will provide you with the targeted base budget amount for all of your funding sources and programs.

As you know, some spending increases are automatic, and consequently you need to take these into consideration. Others, however, are discretionary, and those are the ones that you need to look at carefully and prioritize.

All programs should be essential and they should produce results. We should strengthen our best programs, rather than weaken all of our programs. We should consolidate programs where possible, and always strive to find savings when we can.

Also, the major grant programs in the Department of Public Instruction, such as Foundation Aid, money for teacher salary increases and special education will not be a part of this process. Likewise, the university system can anticipate funding consistent with the recommendation of the Higher Education Roundtable. That represents a critical investment in our youth, and our future. Ultimately the campuses will be responsible for their own fiscal management.

Finally, these guidelines represent just the beginning of a thoughtful and constructive process. Our decisions and judgments today will affect our people and our state tomorrow in very important ways. These include education, job growth, wages, healthcare, senior issues and a range of other important areas.

We owe it to the people of North Dakota to spend their money wisely and balance the state budget -- without any general tax increases. We also owe it to the people of North Dakota to provide them with quality services and real opportunities to build a brighter future for their children and themselves. We can do these things by focusing on our priorities and using our creativity. I know you are dedicated to that task.

Thank you once again for the fine job you do, and all of your hard work.