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Day two of three of North Dakota special legislative session wrapped up today. The bill to shore up our budget shortfall was proposed by the Republicans. Passed unanimously through the senate. And Democrats were trying to make changes to the bill. Tonight we'll talk to the truth about what does this mean for you at home and maybe most importantly tonight we're going to do our best to keep this whole budget thing simple for you.
Good evening and welcome to "Point of view." I'm Chris Berg. As always, thank you for joining us.
Last night we had North Dakota house majority leader Al Carlson on "Point of view." he talked about the special session, where things are going. Tonight we have North Dakota Senate Minority leader Mac Schneider joining us live from our studio in Bismarck. Senator Schneider, thank you so much for joining us.
I want to jump right in here and talk about, let's do our best if you can to really keep this simple 'cause I'm a simple guy tonight. We're talking about property taxes. It seems to be a hot button for everybody. I said to al carlson last night, I've got the proposal that you guys put out last week, meeting the democrats. I'm not the sharpest tool in the shed, but I read this. It says hey, the 12% property tax relief credit comes out of the general fund. Al Carlson said no it comes out of a different fund. You guys here show that a, if we don't get this thing whole in this special session, there is going to be a $16 million shortfall in that budget line, meaning people's property taxes may go up. I want to share with you what leader Carlson said last night and give you a chance to respond.
You know, those moneys can all be restored. That's the next session thing. We've got things covered for this session or very close to covered. So the people next year are still going to see their property tax relief.
So senator, what's happening here for people, so they've got clarity and associate for their property tax bill. He said people are covered through next year. It's not a big deal. You guys show potentially $60 million shortfall, what's the truth?
In the spirit of keeping it simple, chris, that's the sound of the majority leader kicking the can down the road. The $250 million, 12% property tax credit very popular way to provide direct property tax relief to north dakota homeowners. It was subject to now two allotments. 4.05% allotment and now the 2.5% allotment for a total of $16 million less to fund the property tax credit. There is some that believe that maybe valuations will stay the same and there will still be enough in the fund to provide the full 12% tax credit. Let's make sure of it. We had a debate on the floor. We wanted to fully fund the 12% property tax credit, provide assurances to homeowners and to local governments who administer this credit in many ways, that this funding for the property tax credit would be there. It's a critical component to property tax relief and a majority in the senate rejected our amendment that would have shored up that 12% property tax credit. It's a mistake. We shouldn't be putting this off until next session. Let's deal with it now. If it happens to be overfunded, the money won't go anywhere. It will be available for use next session.
So let me ask you this, let's talk about the contingency, $100 million from the state bank of north dakota. That possibly could be a life line for this property tax credit program. I want to get at is this, the $100 million contingency money from the state bank, how much of that is coming off the backs of student loans and their interest rates?
A significant component. We shouldn't be turning to the bank of north dakota to balance our budget. Certainly the bank of north dakota provides financing to thousands upon thousands of students, many of whom go to school at the university of north dakota in my district in grand forks. And it certainly raises the possibility of a moral hazard. We don't want to increase debt for our students as a way to finance government. To the contrary, work with the bank during the 2013 legislative session to allow students to lock in rates as low as 1.5% in many cases. That's direction we should be going. We shouldn't be relying on student debt to finance our governments. No way to run a state government.
For clarity, this $100 million contingency line could be money that we're using based off the interest rates we've been charging students in our state.
Well, there is certainly a bank of north dakota profit that aren't from student debt. I'm not going to say this is all student debt by any means. Bank of north dakota does make a lot of money off of student loans. I think that's established.
Senator, I want to -- we had a voice mail that came in about the property tax situation. It's such a hot button for many people across the great state of north dakota. I want to share with you what a judge called in and said last night and give you a chance to respond.
POV VIEWER VOICEMAIL
Yes. I'm just curious about listening to Al Carlson talk about 12% tax relief and at the same time, when you live in west fargo, fargo schools and all the taxes keep going up on our property taxes. So we're not getting a tax relief. I'm just curious if there is gonna be any plans for people on a fixed income or the elderly, 'cause it's get to go the point where you can't afford to own a house in these cities.
Senator Schneider, elderly gentleman on a fixed income. What do you say to him?
I think that gentleman raises two important points. Number one, maintaining that 12% property tax credit for a lot of people, that isn't going to reduce their taxes. It's going to stop them from going up less. So what homeowners like that gentleman are potentially facing now is sort of a double whammy. Increasing property taxes at the local level and then 12% property tax credit potentially not being fully there as a result of what's going on with the allotments this session. In terms of providing relief to elderly homeowners, there is the homestead tax credit if that individual is watching tonight. Certainly encourage him to apply. But we definitely need to do better for all property taxpayers, especially those who are on fixed incomes.
Senator, we've got bad weather in the devils lake area. I want to get to one more thing about the updated forecast. If you don't mind sitting tight, we're going to go with hutch johnson and give you an update on the weather and come back to you, senator.
We've got Senator Schneider sticking around with us. Thank you so much for doing that. Last night Carlson mentioned tomorrow morning we're going to see kind of our first snapshot of what this forecast is going to look like for the 2017-19 biennium. Yesterday first time since april oil closes below $40, a very important marker for oil right now these days. What do you anticipate seeing tomorrow in this initial forecast?
I think we're all going into this next biennium and taking in the forecast with an appropriate measure of caution. We certainly don't want to be overly optimistic. We want to plan for the worst case scenario. And so really comes down to the bottom line, chris. We can't control the price of oil. We can only control how we react to that. And the last legislative session was a revenue volatility study. Was there a way to more properly fund these sleepy funds that we established, consolidate them, make sure we have more of a cushion in the event of a down turn like we're seeing right now. I think in the long run what, it really calls for is budget reform. But in the near run, we'll definitely have to be sensible and cautious going into next legislative session. There is no question about that.
With that being said, last question for you, governor is looking at a 90% budget of what he had originally talked about. Do you think a 10% cut is enough, number one? Number two, are there places you would like to see to raise taxes in north dakota to increase revenue?
When it comes to raising taxes in north dakota, count me out on that one. To answer the question about 90% budgets, I think it's totally appropriate to ask agencies to come up with 90% budgets. Some budgets may be funded in 92%. Some may be 95. But at least the savings are. At least they can be considered by the next governor, whoever that governor may be. So I think it's definitely appropriate to plan for the worst and a lot of ways we haven't done that in the north dakota legislature. We were adamant at the beginning of the session last year that we wanted to save five legislative days to bring ourselves back in in case oil started to tank or other adjustments were necessary. That didn't happen. As a result of lack of discipline by the legislature. I think we need to be prudent. We need to understand that low oil prices is something that could continue. In the long-term, let's stop funding our budget off of oil tax revenue, whether it's sales tax, extraction tax or whatever else. We need to reform our budget.
Thank you very much. You think about it, you guys ended the session with 800 million in the piggy bank. That is now gone as of today. It's going to be a fascinating session coming up in january and senator, we appreciate your time, sir.