Burgum calls on state agencies to ‘tighten belts’ for 2025-27 biennial budget

North Dakota Gov. Doug Burgum called on large state agencies to reduce their annual operating budgets by 3% as he presented his budget guidelines for the 2025-27 biennium to department heads and the public Thursday.

During the presentation, Burgum said state agencies need to “tighten their belts,” just like many North Dakotans, as they deal with higher costs of living due to inflation and ongoing workforce shortages.

“We realize that asking agencies to cut budgets may seem counterintuitive to some people because there is a lot of attention to how well we have built up our rainy day funds and our reserve funds,” Burgum said. “I’m happy we’re able to stand here today and say our balances in our reserve funds have never been higher, but that still doesn’t mean, with the dollars available … that we don’t have to be continually thinking about, how do we do our jobs more efficiently?”

He also said state budget writers should also be mindful of the population increases the state has experienced over the last 15 years, which has led to more services being provided. Between 1930 and 2005, Burgum said, North Dakota’s population decreased; however, since 2010, the state’s population has increased by more than 110,000 residents – about the combined population of Bismarck, Mandan and Jamestown.

“Some things that we do in state government relate to formulas and when we add more people, there’s going to be upward pressure,” he said.

State general fund revenues for 2023-25 were 10.8%, or nearly $213 million, ahead of forecast through March.

The Office of Management and Budget projects relatively flat oil tax revenue for the 2025-27 biennium, said Director Susan Sisk. The agency, which consults with financial services company Moody’s and oil industry representatives, forecasts oil production of 1.2 million barrels per day at an average price of $62-$65 per barrel for 2025-2027.

“There continues to be a lot of volatility and risk around oil in the market with elections, international relations and locally, we’re still waiting on a ruling for the Dakota Access Pipeline,” Sisk said. 

Burgum said North Dakota has little flexibility over 60% of its budget because of formula-based funding programs accounting for the state’s K-12 school aid, higher education and Medicaid programs.

“You’ve got over $2 billion that is going to K-12, all of that, every biennium, is just property tax relief,” Burgum said. 

He added any changes to the formula structure would have to come from the Legislature.

When asked if the budget guidelines include potential pay increases for state employees over the next biennium, Burgum said state leaders were able to fund those increases last time because they found efficiencies in other places. He added that more baby boomers will be retiring over the next five years and learning how to do more with less will be critical to keeping budgets manageable.

“We need to think about a state government that has less, but higher paid team members,” Burgum said. “To justify the higher pay, it’s not just market rates, but it’s also, can we create this purposeful work, where they have a job that is adding a bunch of value as opposed to doing paperwork that could be automated?”

Also Thursday, Burgum announced the creation of the Office of Outdoor Recreation. But he noted the office will make use of existing state resources.

Burgum is not seeking a third term as governor.

Democratic-NPL governor candidate, state Sen. Merrill Piepkorn of Fargo, said during times of relative prosperity, budget cuts shouldn’t be the starting point for crafting a budget.

“Our Legislature would be wise to enact legislation that would encourage people to move here, rather than throw up barriers to discourage people from moving here,” Piepkorn said in a statement. “There are always efficiencies that can be made. But have you driven our highways and bi-ways lately? There’s plenty of work to be done by the Department of Transportation.”

He highlighted the need for $46.3 million to fully fund the Highway Patrol retirement fund, which would have to be passed by the Legislature. Piepkorn added North Dakotans should be wary of campaign-style speeches during announcements like this in an election year.

“Budget cuts and phrases like ‘we’re holding the line’ are popular this time of the year,” Piepkorn said.

State agencies will begin submitting their new biennium budget proposals through July 15. The Office of Management and Budget and the Governor’s Office will then begin their analysis and prioritization of those proposals before presenting an executive budget to the Legislature in December.

The 3% budget reduction guideline applies to state agencies with budgets of $10 million or more in general funds or special funds.

Senate Majority Leader David Hogue, R-Minot, said a 3% budget reduction for state agencies is a fair starting position.

“I don’t think that’s out of the norm,” Hogue said. “We always tend to look at ways to reduce just because that’s part of our conservative mantra. We don’t look to grow government.”