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24/7 Wall Street's "Best Run State" Rating for North Dakota PDF Print E-mail
Written by Chet   
Wednesday, 28 November 2012 13:33

NDCorruptionYou've probably seen by now that "24/7 Wall Street" gave North Dakota first prize in its "Best Run States" analysis.  Here's what they wrote:

> Debt per capita: $3,282 (22nd lowest)
> Budget deficit: None
> Unemployment: 3.5% (the lowest)
> Median household income: $51,704 (20th highest)
> Pct. below poverty line: 12.2% (13th lowest)

For the first time, North Dakota ranks as the best run state in the country. In recent years, North Dakota’s oil boom has transformed its economy. Last year, crude oil production rose 35%. As of August, 2012, it was the second-largest oil producer in the country. This was due to the use of hydraulic fracturing in the state’s Bakken shale formation. The oil and gas boom brought jobs to North Dakota, which had the nation’s lowest unemployment rate in 2011 at 3.5%, and economic growth. Between 2010 and 2011, North Dakota’s GDP jumped 7.6%, by far the largest increase in the nation. This growth has also increased home values, which rose a nation-leading 29% between 2006 and 2011. North Dakota and Montana are the only two states that have not reported a budget shortfall since fiscal 2009.


Let's walk through a problems with this analysis.

First, North Dakota was rated as the "Most Corrupt State" by USA Today just four years ago (see graphic, above/right). Since then, Democrats have repeatedly tried to get legislation passed to clean up some of the corruption, but corrupt Republicans have been very effective in keeping a strangle-hold on the state.

Second, the reason North Dakota has no budget deficit (and, in fact, a significant surplus) and a low "debt per capita" is because of the natural resources taxation system proposed by North Dakota's Tax Commissioner (at the time), Byron Dorgan. Here's a snippet of the history on that:

In the early morning hours of Good Friday, April 8, 1977, the North Dakota Legislature enacted the state’s first real coal severance tax after an all night session. North Dakota Democrats, led by Tax Commissioner Byron Dorgan, held out through a bitter, and arguably the most interesting, legislative session in all of state history to enact a hefty tax on lignite coal to be strip mined from North Dakota’s shallow underground coal beds. A bill likely written by Dorgan’s chief lieutenant in the tax department, Kent Conrad (HB 1360), was the impetus for the beginning of what was to become a critical revenue source forNorth Dakota state government. Dorgan huddled with Democratic-NPL Legislators Richard Backes and Buckshot Hoffner for three and a half months, in the end bringing Republican leaders Earl Strinden and David Nething to the table to negotiate a reasonable tax on coal (more about this session in a future blog).

Three and a half years later, late in the evening on November 4, 1980, the North Dakota news media reported that North Dakota voters had approved an initiated measure, Measure 6, which levied a new 6½ per cent tax on oil extracted from North Dakota’s oil fields. The measure, sponsored by a committee composed of the North Dakota Farmers Union, the North Dakota REC’s, the North Dakota Education Association, and the North Dakota AFL-CIO, and written in the office of Tax Commissioner Byron Dorgan (likely by his chief lieutenant Kent Conrad), was overwhelmingly approved, more than doubling the state’s tax on oil from 5 per cent to 11½ per cent. Dorgan and Conrad staked their elections that year, for Congress and State Tax Commissioner, respectively, on that measure, championing its cause as the basis of their campaigns. They were the only two Democratic-NPL statewide candidates to win election that year.

It was Dorgan’s genius, in both cases, to recognize that mineral extraction was going to be an important piece of North Dakota’s economy and that putting a reasonable tax in place while those industries were in their infancy could prove to be an important source of revenue to the state for many years.

The Prairie Blog

Don't look for North Dakota's rocket-scientist "journalists" to report about any of that. Few of them have institutional memory of North Dakota past about three years ago.  

We are actually pretty lucky that Republican corporatist attempts to "fix the tax" have been relatively unsuccessful. But they've found other ways to leach money away from where it is desperately needed.  On the downside, corrupt Republicans have figured out a way to reduce the amount of tax revenue available to resolve some of the significant oil field problems, by creating abusive, deceptive tax schemes such as the bought-and-paid-for "mega unit" stripper well tax exemptions.  

Importantly, the people "leading" North Dakota today had nothing to do with oil development in the Western 1/3 of the state today. All they've done -- if anything -- is line their own pockets, and serve as cheerleaders. They've done nothing to ensure the safety of North Dakotans, our natural resources or our heritage. They didn't put the oil in the ground, and they're doing nothing to ensure that it's extracted in a reasonable, safe, responsible way.  

And, lastly, what in the hell is "24/7 Wall Street"? Had anybody ever heard of it before this rating?

North Dakota's condition today should be judged by where we have been, and where we are headed. We should not be judged by where we are right now. Right now we are in the middle of an oil boom -- or bubble -- that is destroying and/or depleting North Dakota's highway road system, its wildlife, its natural resources, and its way of life. To truly "rate" where North Dakota is today, we should look at two things: (1) the successes of North Dakota's Democratic-NPL extraction tax system from the 1970s and 1980s, and (2) what North Dakota is headed for in about 5 or 10 years. Ask anybody at North Dakota's Game & Fish Department where North Dakota is headed.  Ask the folks in law enforcement in Williams, Mountraill or McKenzie Counties. Ask the teachers and school administrators in oil country.  They'll tell you they're under-staffed, under resourced, and headed for trouble. That's what they'll tell you if they trust you not to take more of their resources away. So if you're a Republican, don't count on getting an honest answer from them. You scare them. They've seen the damage you can do. They're living it.

Listen: I love what North Dakota has been most of my life. It's always been a great place. But most people will acknowledge that our state's leaders have failed to properly manage the oil bubble we're experiencing now. We're headed for a really big mess. The hard part about a bubble like this isn't the bubble; it's what's left after the bubble bursts.  

And there's gonna be one massive mess to be cleaned up when this oil bubble bursts.


Look for a revised rating from "24/7 Wall Street" when it does. Or don't.

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