CHICAGO - North Dakota will weather slumping oil prices and continue to pursue tax cuts and spending on badly needed infrastructure in oil-producing counties, Gov. Jack Dalrymple said Tuesday in his state of the state address.
"There are risks associated with any economy that relies on the value of commodities, and those risks must always be carefully considered," Dalrymple said. "We guard against those risks in several ways, including directing the vast majority of our oil and gas revenues - about 96% -- to special revenue funds that are not used for ongoing operations."
The governor said he remains committed to tax cuts and infrastructure spending despite falling oil prices.
North Dakota is one of several oil-producing states in the U.S. expected to feel the heat from declining oil prices. Market participants have warned that states like North Dakota and Alaska will feel more economic pain than states like Texas and California, which have more diverse economies.
North Dakota has built up a record high surplus in recent years thanks to the Bakken oil field, and lawmakers have spent much of their previous sessions arguing over how to spend the money.
Dalrymple's address marked the return of state lawmakers to the capital for an 80-day legislative session. Legislators, who meet only every other year in North Dakota, will tackle a new two-year budget amid the falling oil prices. They will use new revenue projections that the state expects to release by March.
In addition to the pressure from falling revenues from low prices, North Dakota's oil extraction tax is automatically waived if prices remain below $52.59 a barrel for five months.
Dalrymple's proposed all-funds, two-year budget totals $15.7 billion, by far the highest to date. General fund revenue totals $5.4 billion, with expenditures totaling $5 billion, with another $1.4 billion in one-time revenues and $2.2 billion in one-time general fund expenditures.
The budget relies on November 2014 revenue projections that assume oil prices will range from $72 to $74 per barrel through June 2015. U.S. oil prices on Tuesday fell below $50 a barrel.
In his state of the state, Dalrymple said he remains committed to increased infrastructure spending in oil-producing counties, which have lobbied hard to win more money to handle population explosion associated with the boom.
The governor wants to increase spending on oil-producing counties to $3.7 billion in 2015-2017, up from $2.7 billion in the current period.
"Energy independence in the United States is a game changer. No longer can OPEC and other foreign oil producers hold our country hostage to their control of oil supplies," he said. "In the end, our growth may be slowed, but it will not stop."