(upbeat brass)
- This is North Dakota Legislative Review.
I'm Dave Thompson, thanks for joining us.
Our guest in the program this week
is the House Minority Leader,
Representative Corey Mock from Grand Forks.
Corey, thanks for being here.
- It's great to be here.
- So we are entering what a lot of people
are now calling the third period of the hockey game,
because now you're starting to set conference committees,
or concurring with what the other house has done.
As we sit here today, getting closer to the end,
how's it looking?
- Well, that's maybe a difficult question to answer,
but I can say, I appreciate the hockey analogy,
being from Grand Forks.
You're exactly right about the timing.
Right now, the number one priority for the legislature
is to balance the budget.
As most people have probably heard,
we are over-committed on our expenditures.
We're roughly $670 million short
of meeting our expenses for this next biennium.
And it's gonna be challenging.
We're seeing the appropriation bills are coming out
with even more reductions.
Some of that may be for posturing and negotiations,
some of those cuts may stay.
But the last three or four weeks of this session
are gonna be filled with conference committees,
negotiations, and a lot of conversation about fiscal policy.
It's not just about the 2017 biennium,
but what can we expect in the 2019 biennium and beyond.
- Have you ever seen a situation
like the one we're in right now?
- No, not in my time.
I've been in the legislature now for,
this is my eighth year, my ninth year,
fifth legislative session.
And we have, I used to hear how people would say,
"It's so much harder to serve in the legislature
"when there's money.
"When you have a surplus."
Because everybody, "We need to invest in this,
"this is a good program."
And it becomes difficult to say no to very worthwhile ideas
when you have surplus money that exists.
I've never served in a session
where we've had to cut budgets upwards of 20%.
And you're laying off nearly 8 to 9%
of your public employee workforce with reductions.
As difficult as it may be to say no
to a good idea when there's money around,
it is excruciatingly painful to see the cuts
that are going to affect the state.
I mean, it may be an easier answer,
but it leaves me sleepless most nights.
- You know, there's no appetite
to raise taxes at this point.
So you have to find money where you can find it.
Cuts, maybe going into some trust funds
that may not have been designed for the use
that you might have to use them.
There's been a lot of talk about
how trust funds are gonna be used.
- Yeah, so as I said,
we are $672 million dollars short of meeting our needs,
of our expenses.
And that's after all the cuts that have happened to date.
We will balance the budget.
There is no way around it.
What we will do is use,
use a budget stabilization fund,
we'll use our strategic investment fund,
we may even use the tax relief fund.
You know, all told, we have
about 7 to 800 million dollars
in trust funds that we could use.
But as we use those, that's like dipping
into the savings accounts to pay your rent
and your food bill, and to put gas in the car.
The end of the day, yeah, you might ride it out today,
but unless something changes,
we're not gonna have the money in those reserve accounts
to build up this budget,
and hold us harmless beyond this biennium.
- Yeah, you talked about the various funds,
there's one fund out there that
you don't really want to touch,
and that's the Legacy Fund.
Because it would take a lot
to actually get to the principle.
You are using some of the interest on it.
- We are, and that is a requirement.
So when we passed what became the Legacy Fund,
there was a lot of negotiation in the hearings
about whether or not the legislature
should be able to use some of it, or none of it,
what do you do with the interest?
And it came out that we wanted the fund to grow.
I liken this to your child's college fund.
Yeah, it's there, but you didn't save that money
so that you can buy a bigger car.
You did it for long-term investments.
Right now, it's about $4.2 billion,
is what we're projecting.
And we could use a little over $600 million
of the principle, if we needed to.
But then that's money that would go away,
and not collect interest,
and not be available for investments.
And if we begin to use those dollars
in a long term savings account
to shore up ongoing needs,
we're just as unsustainable and just as vulnerable
in the future, as we are now.
It doesn't really help solve the problem.
But the interest is there, about $160 million,
its automatic.
And then that joins the remaining funds
that we'll likely use to balance the budget.
- By dipping into the principle,
that would be less than a zero sum game perhaps?
- Correct.
And I should mention,
now, we talk about the budget challenges that we're facing.
Our budget is drastically reduced from last biennium.
We've been looking at $6-plus billion budgets.
Today, our expenses are about $4.3 and a half billion,
$4.3, 4.4 billion.
That's how much we'll spend.
But our revenues, our ongoing revenues,
are right around $3.6 billion.
So we're short, and by a considerable amount.
There's no forecast model that shows the revenues increasing
to meet the needs of our expenditures
under current budgets.
So this is an unsustainable budget
no matter how you look at it.
And as you said, there has, so far
been no appetite to discuss taxes.
The other thing that we could talk about is,
there is a cost to continue all the tax breaks
that we have given out over the last eight years.
So we do look at that as giving back money to the taxpayers,
investing in your communities.
But that has had a cost of how the state balances its budget
and serves the communities.
- And you're talking mostly about income tax breaks.
But there was some property tax breaks too.
And when you mentioned that you might
be dipping this tax refund,
you are talking property taxes.
- We are,
and the state doesn't collect property taxes,
but it's the number one tax that we,
as legislatures hear about,
I probably could count on one hand
the number of times I've gone to a door
and the discussion of property taxes didn't come up.
It's on everyone's mind.
In 2008, we had the lowest income tax rates
of any state that collected it on earned income.
There was no state lower than us.
Voters in 2008 rejected a 50% cut
on their income taxes at the ballot box.
But every biennium, in 2009, '11, '13, and '15,
the legislature decided to give income tax breaks
to both individuals and corporations.
The cost to continue those cuts,
going from 2008 to today,
we are giving up, we're losing $636 million
in revenue of this next biennium,
just on the individual income tax cuts.
Right now we're looking at about $92 million,
and with some other formulas,
that number could be as high as $150 million
in lost corporate income tax revenue.
And then the property taxes,
we actually fund a lot of property tax relief,
through K-12 education, and property tax buydowns.
The cost for that, for K-12, is about $735 million,
and the property tax relief is about $240 million.
All told, we put about $1.75 billion
of our money towards tax relief.
So the cost to continue has to be,
we have to consider that
when we're looking into those numbers.
- So it sets things up for what could
be another tough session in '19.
- I think it will be.
It is a very difficult conversation to have,
just looking at the sustainability.
One of the things that we're looking into
is the projected growth of the state's economy.
And what is our gross state product
over the next several years?
(Mumbling) projects that there will be
some modest growth in our economy,
even if all things hold constant.
Lower ag prices, low oil prices, weak Canadian dollar,
we still may see some economic growth.
That said, it's not nearly enough to get us
to the prosperity years of just three to four years ago.
- I wanted to go back to property tax buydown fund,
because that's 12%.
- [Corey] Right.
- There has been a lot of talk in the hallways
that 12% may not survive this biennium.
- Right, and we started this last session,
and the legislature doesn't collect it,
but we wanna provide the relief.
And the way we did it was set up a fund
and said, "We will use oil tax dollars
"that we get in a fund,
"and we will send those back to cities and counties
"to help lower the property taxes."
So 12% relief off the top.
That money may not be there, and,
first of all, it's unsustainable to just buy down the mills.
As values grow, it's out of our control.
So there's a lot of, there's a strong appetite
to get out of that business altogether.
But we want to get into funding social services
by a formula.
And that way, at the county level,
you don't have to charge your property taxpayers
on social service fees.
We as a state can pay that,
and we'll do it on a formula basis.
Unfortunately, that takeover was defeated this week
in committee.
It was turned around into an amendment, or to a study.
And I don't believe that it's gonna come
out of the House or the Senate this session.
The 12%,
I hate to say this, but I,
we will not have 12% property tax relief buydowns
this session this next couple of years.
Which, I don't know if it's gonna be a cold cut,
or if it's gonna be gradually reduced
over the next two years,
but for everybody listening,
you know, property tax, if that's a concern of yours,
by the end of this legislative session,
you may see an increase in your property taxes.
For a $200,000 home in Grand Forks,
if that 12% tax relief goes away,
your property taxes go up by $367 a year.
So we're talking real impacts to North Dakotans
and many of those folks may live in fixed incomes
and just couldn't afford it in the first place.
- And here's probably the most interesting question,
where is that money going, if there is money there?
- The money for...?
- The 12%. - The 12%.
The tax relief fund is gonna go to hold this
help sustain the income tax cuts,
along with the increased spending that we've had.
K-12 spending, human services and healthcare,
that's where those dollars go.
But I really can't emphasize this enough,
we have really overcommitted in a lot of ways
the amount of property tax and income tax relief
that we wanted to give to the citizens.
And if we change nothing,
we may have even lower income tax rates
than the already lowest that we had in 2008.
But it may come at the expense of property tax relief.
And I think voters, or property owners
and residents of North Dakota
are gonna start to feel that pinch.
- If that bill were to pass,
that would've, the state taking over
the funding of county social services,
would that have been sustainable?
- That would've been sustainable,
provided we use the tax relief fund.
And now, that fund gets $300 million from oil tax revenue.
And that fills up every biennium,
and we would've used that money.
The formula, it would've cost approximately $275 million
to maintain that tax relief through the formula.
And that would've held everyone harmless,
you would have the same 12% cut
reduction of property taxes,
some maybe even had a little more.
But it would've put us as a state
in charge of funding those county social services.
And then it would've been based on delivery of services.
- Right, instead of a direct property tax,
dollar for dollar.
- [Corey] Correct.
- When you look two years down the road,
when you gavel in,
the outlook is not very rosy in your mind.
- It's not.
And again, I,
I'm probably not invited to too many parties these days,
I don't have a real optimistic view.
But I also know what past we're reading from.
You think back, and to many viewers,
they may recall what it was like to be in North Dakota
during the early 80s.
You yourself covered the legislative session in 1981.
We were facing some very difficult economic challenges.
And we saw budgets through all of our schools,
those budgets were cut.
Certainly, there was no discussion but tax relief,
we couldn't pay the bills we had.
That's gonna be a challenge in 2019.
Again, there is no forecast that shows
that we're gonna see the growth needed
to maintain the spending levels we've committed to.
And as long as this legislature wants to prioritize
education, healthcare, DOT and infrastructure,
and also maintain those income tax cuts,
you're gonna see the burden shift back
to local property owners.
- Alright, since you mentioned DOT,
I wanted to talk to you about that.
A lot of these moneys from federal dollars
come with a match requirement.
Are we potentially leaving some federal money on the table?
- It certainly could possibly happen.
If we were, and last legislative session,
in the last couple of years,
we've infused about a billion dollars
into infrastructure payments.
The surge bill that we talked about
over the last couple years,
I'm sure we've even talked about it here two years ago,
was beneficial to many counties.
That built a lot of roads.
I think we built approximately 200 laned miles of new roads
using those dollars.
Wonderful quality, the quality of roads,
the experience of drivers in the state went up
as a result of that.
Anyone who's driving, who's driven recently
and hit a pothole may disagree.
But generally speaking,
roads have had good dollars invested in them.
And as we age, as those roads age,
we're gonna have to maintain all of those miles of road.
We're gonna have to do it with less money,
because cars are more efficient,
the gas tax has not been adjusted since 2005.
And frankly, we're not sure
that the federal dollars will be there.
To maintain the current status quo,
all things constant, maintain the roads we have,
it's gonna cost about $66 million more
than we have in our budget.
And that's where the sustainability question comes from.
- I know that there's been some talk
about maybe looking at a gas tax,
(mumbling) we talked earlier,
or looking at some fee increases,
maybe registration for cars
to raise some money there.
But there doesn't seem to be any appetite for that either.
- There really hasn't been a strong appetite.
We all know that this may be a necessity.
With highways, it's a user fee.
We don't want to use the sales tax dollars,
or the income tax dollars that we get
to go and pay for roads that were
supposed to be funded using gas tax dollars.
And as a state, we have been pretty good at that,
with the exception of a couple of years.
The current tax level for gas tax doesn't meet the needs.
And,
I don't know that we'll do it this session,
but in 2019, as we see more deferred maintenance,
if we see a larger gap between our needs and our revenue,
the legislature may look into raising a tax,
or raising fees at the DMV.
- Well, we haven''t mentioned higher education,
I wanted to get into that very briefly.
UND has announced they're going to be
cutting back some of the athletic programs,
including women's hockey.
And men's and women's swimming.
They've done a lot of cuts,
there's a lot of cuts throughout the university system
and the reductions, maybe more than the 20%.
Are we setting ourselves up for failure on that?
- Well,
the decision on what to cut at the university level
was not made by the state, but made by the university,
and the university system.
However, we do put the money,
we do appropriate the dollars they have.
So we give them their budget and say,
"You have to make it work with this much money."
We also don't let them do much with tuition.
So we do tie their hands a bit.
The University of North Dakota did decide this last week
that they were going to eliminate swimming and diving
as well as women's hockey.
And I'm guessing they looked at the numbers,
they weren't, certainly not profitable.
They were costly programs.
I believe the women's program alone was,
women's hockey, was $1.9 million.
That was a decision the university made.
UND has, today, before the cuts, 18 athletic programs.
NDSU has 14.
They don't have a hockey program.
And hockey is a very costly program.
The women's team, just as the men's team,
have to fly to virtually every game.
It is a costly program.
It's a great program, and it does a lot for our community.
Can't be Hockey Town, USA without having a good hockey team.
But we are, I am concerned with higher education,
the way we've reduced their budgets.
If we want long-term, sustainable economic growth,
if we wanna diversify our economy,
the engine to do it comes from your higher ed collages,
the 11 collages.
They train the workers, the professors,
they do the research.
That's what creates the opportunity for economic growth.
By cutting the way we have,
we're making our campuses strategically weaker.
We're hurting our ability to recruit,
to maintain good staff,
and possibly to grow the jobs we need
to diversify our economic base.
- So there's no easy solution to that, either.
- There really isn't.
And again, it's a matter of us prioritizing income tax cuts
above some of these spending priorities.
And I cannot emphasize this enough.
Everybody in the legislature wants
to pay the lowest taxes possible.
We all do.
I have a feeling even you wanna pay
the lowest taxes possible.
Nobody wants to pay more taxes than we need.
But I think we're setting ourselves up
for long-term heartache,
and many difficult decisions down the road, if we say,
"This is how much money everything needs to fit into."
But without really looking at
what the priorities and the needs are.
I think we're doing it backwards,
we should be looking at priorities,
making strategic investments,
and then making sure that we have the funds necessary
to fund that, long-term.
- Okay, I'm going to switch gears
on you for just a second, because,
this I wanted to ask your opinion
as a member of the House Education Committee.
This innovation bill that was pushed,
it was changed a bit in your House committee.
And I'm guessing that might end up in a committee as well.
And the innovation bill was pushed
by Superintendent Baesler.
It was a bipartisan group that had sponsored it.
What happened?
- Well, there was some concern.
And the innovation bill was Superintendent Baesler,
which, I believe, had a birthday this week,
so happy birthday Superintendent Baesler.
That, they had worked with education groups and schools.
They wanted to give school districts
the opportunity and ability
to be a little creative with how they deliver education.
Perhaps you have experiential learning opportunities
that just don't fit quite within the,
seat time requirements we have for students.
So if a school district wants to try something different,
give a different educational experience
to the gifted students,
or students with additional needs or desires for learning,
that we can waive certain sections of law.
And the Superintendent would've had that ability.
And there was a lot of heartburn
over giving a member of the executive branch
the ability to just waive a state law regarding education.
The bill was originally to let them make many waivers
on virtually any education law.
We amended it quite heavily to restrict her
to about six or seven different sections of code.
There was still some heartburn over that.
I'll be curious to see what the Senate does.
It's a two year pilot,
it'll take a year to even get implemented.
We won't see numbers until maybe even the 2019 session.
But it is a neat attempt for us to have public schools
enacting the innovation and flexibility
that you often see in charter schools around the country.
- And this fits in with Governor Burgum's vision
to reinvent government.
- Right.
And again, it's allowing innovation to flourish,
really, in a system that is often
tied down through bureaucracy.
Again, as you mentioned,
very strong bipartisan support in the idea.
We wanna give our teachers,
our school districts, superintendents, principals,
the ability to get creative, have some fun,
and increase, or enhance, our educational outcomes.
- One thing that Governor Burgum had asked for
along that same line was to have a pool of money
for him to do some kind of restructuring.
But there doesn't seem to be much support.
- Yeah, you know, this may be more a product
of a private sector CEO stepping
into the Governor's office in state government.
He wants that flexibility to shift dollars around.
The problem with policy,
and again, I think we're all open minded
on having some flexibility and making better returns
on how we as government operate.
But when you shift those dollars,
it really makes it difficult for you
to take a sustainable, predictable budget,
and then know that that money's gonna be there.
Because at the strike of a pen, all of a sudden,
maybe 5% of one program's budget is gone,
and it's over somewhere else.
For employees, it's unpredictable.
There's really no way for him
to guarantee the revenue's still,
that they're held harmless.
And, you know, frankly speaking, the legislature,
we do carry the power of the purse.
We are the elected officials that are closest to the people.
There's 141 of us between the two chambers.
I have about 14,000 constituents back home in Grand Forks.
If they have a concern, they call me,
they call my cell phone.
They're calling the same number
my mom calls to tell me happy birthday.
We're very close to the people,
and we wanna make sure that we're establishing
the spending priorities that really reflect
what North Dakotans need.
- It's the (mumbling),
the governor proposes, the legislature disposes.
(Corey laughs lightly) The governor does
have a veto power, but you can override the veto.
There's still those checks and balances.
- We are three branches of government,
and they are co-equal branches of government.
We certainly work with the dollars, we levy the taxes,
we collect the dollars, we appropriate them.
The executive branch gets to enact the legislation,
and then we look to the judiciary
to interpret all the laws we pass.
- We don't have a lot of time left,
I just want to touch briefly on medical marijuana.
What is your, caucus members who are
in that committee telling you about the amendments?
- There's been a lot of wonderful headway.
And I wanna give a lot of credit to the entire committee.
Hats off to Representative Robin Weisz
who's a Republican from Hurdsfield, North Dakota.
He has been there a long time, chair of the committee.
Has truly been diligent in his work,
and worked with both parties with measure five supporters
to get a good product in through the bill,
through his committee.
And hopefully passed by the House.
The intent has always been to get it
as close to measure five as possible.
We wanna make sure that the spirit
and intent of the voters is upheld.
There were some legal issues that had to be addressed.
I know there's a lot of changes that've been proposed,
most of them have been enacted.
We're still not quite done, but I'm very confident
that we're gonna have a product that everyone can agree to
and say, "This was a good bill."
- It'll be worked out in the conference committee, perhaps.
- If need be, it will.
- And, from your caucus, what are you looking at
as maybe a couple of victories?
- One, it's, the biggest victory from my standpoint is
if we can set ourselves up for that long term growth.
We need to know if this is sustainable.
Whatever information we can glean in this interim,
and set ourselves up,
is gonna be a strong win.
Making sure we're investing in our communities,
working with our constituents.
I hate to say minimize the harm
that these budget cuts have caused.
I'd like to eliminate them altogether if we could.
But it's really a matter of making North Dakota
an economic powerhouse moving forward.
- But reality, you can't do that
given your financial situation,
but looking ahead, you do see maybe brighter days
down the road.
- They certainly could be.
And I think if we as a state become strategic,
and we're willing to swallow our pride
and recognize that maybe the policies we've passed
over the last several years
weren't the best, long-term.
We look at volatility studies,
we see how much revenue we're gonna get,
what our priorities are,
how can we invest in small businesses.
If we have a heartfelt conversation with ourselves,
we visit with cities and counties,
we visit with business owners and our constituents,
we may be able to get good information
and come back stronger in two years.
- Okay, quickly.
Prediction, (mumbling).
- Oh boy.
I think we're gonna be up the last week,
I think we're gonna have, I'm gonna say day 78.
- Okay, day 78.
- And that'll put us, I believe, in the last week.
We were hoping to get (mumbling) out before Easter.
Representative Carlson has a chocolate Easter bunny
on his desk as a reminder that Easter was the goal.
But I don't know that that's gonna,
we may send flowers over to the Senate
to say that April showers bring May flowers.
We may be here to the bitter end if we don't find agreement.
- Well thank you for taking the time.
- Thank you, Dave.
- Our guest today, Corey Mock.
He's the House Minority Leader from Grand Forks,
he's a Democrat.
For Prairie Public and Legislative Review,
I'm Dave Thompson.
(upbeat brass)
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