Gov. Kelly Armstrong presented his executive budget guidelines for the next biennium on Apr. 8, calling on state agencies to either maintain or reduce their budgets as part of a strategy to align general fund spending with revenues by 2032.
The move comes in response to what Armstrong described as an unsustainable growth rate in the state budget over the past two decades. He said that while much of this growth was necessary, it has led to a widening gap between ongoing revenues and expenditures. “We have a balance problem in our state budget. The growing gap between our ongoing revenues and ongoing expenditures is a slow-building storm, and we need to start correcting deficit spending in the general fund,” Armstrong said during a meeting with agency leaders and fiscal officers at the Capitol.
Under the new guidelines, agencies with general fund budgets under $10 million are instructed to prepare hold-even budgets. Agencies with budgets between $10 million and $20 million must identify base reductions of 3%, while those exceeding $20 million must find ways to cut their base by 10%. Additionally, agencies required to hold even or reduce by 3% are asked to submit an extra contingency reduction package of another 3% due to potential revenue shortfalls linked to volatile energy markets.
Armstrong emphasized that no new full-time positions or building construction projects will be approved without exceptions. Any proposals relying on ongoing revenues should be matched by equivalent cuts elsewhere in ongoing expenditures. However, current agency salary budgets will remain fully funded out of consideration for existing employees.
Office of Management and Budget Director Joe Morrissette addressed the nearly $800 million gap between general fund ongoing revenues and appropriations at the start of this biennium. “While strong revenue growth is expected to reduce this gap, significant effort and collaboration across all agencies will be necessary to develop a budget that puts us on a sustainable path and ensures ongoing revenues and expenditures are balanced,” Morrissette said.
Higher oil prices have boosted state tax revenue projections for this biennium’s ending balance by about $318 million; however, Morrissette noted most of these funds are available only for one-time use rather than closing the long-term structural gap—echoing Armstrong’s call for careful planning.
