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Public Statements

2013-2015 Executive Budget Address

By:
Date:
Location: Bismarck, ND

The Honorable Jack Dalrymple Governor of North Dakota
Good morning. I am pleased and honored this year to welcome the members of the 63rd North Dakota Legislative Assembly, Lt. Governor Drew and Kathleen Wrigley, elected officials, cabinet members, state employees, First Lady Betsy, and my fellow North Dakotans.
At the outset, I want to thank the staff of the Office of Management and Budget, our cabinet agencies, and our staff in the Governor's Office for the hard work and thoughtfulness they brought to the job of building our new budget.
Together, I believe we have produced a budget for the people of North Dakota that is appropriate for a very special time in our state's history, a time of incredible growth and expansion, but it is also a budget which is careful to recognize the risks of overexpansion.
In drafting our last budget, we were guided by three key objectives that have served us well in the current biennium. We have set those same objectives for our new budget as well. They include funding priorities with a special emphasis on infrastructure; setting aside adequate reserves for a rainy day; and providing additional tax relief for the hardworking men and women of North Dakota.
These themes remain familiar, but we have several new proposals that will open a new chapter in our state's history. We've worked hard for our prosperity and now it's time to put our prosperity to work for us.
Today, I am pleased to present the results of our efforts, the 2013-2015 Executive Budget―a budget that will make it possible for us to literally "create our future together."
The Big Picture
I'll begin with an overview of our budget plan.
Due to our growing economy, both our ongoing revenues and our reserves have shown gains since the beginning of the current biennium, and that growth is forecasted to continue into the next two-year cycle, as well.
As always, we have carefully examined our revenues and expenditures, and we have taken care to ensure that our ongoing revenues exceed ongoing expenditures, as you can see in Chart 1.
In the 2013-2015 biennium, our General Fund ongoing revenues will total about $4.8 billion. At the same time, ongoing expenditures will total $3.8 billion. This surplus in ongoing General Fund revenue makes possible our substantial one-time investments in infrastructure while still providing tax relief and building our reserves. Never before in our state's history have we had a structural balance to our General Fund budget as strong as what we are proposing today. What an extraordinary time for our state!
Our budget recommendations, compared to the total legislative appropriations for the current biennium, represent an increase of 9.4 percent per year. However, nearly half of this increase is due to the cost of continuing the programs we have today. Medicaid and increased school enrollments are the main sources of higher costs. Excluding the unavoidable costs of continuing programs, our discretionary increase in ongoing General Fund expenditures would be 5.2 percent per year.
Our strong revenues will allow us to set aside large amounts for urgent infrastructure needs, property tax relief, and transfers to the Budget Stabilization Fund in the current biennium. Even after those large transfers, our actual General Fund cash balance will be about $69 million on June 30, and will grow to $81 million by 2015.
It is important to remember that our budget for ongoing General Fund spending is limited to $300 million of oil and gas tax revenues as prescribed in law last session. The remainder of the oil tax revenues, as seen in Chart 2, is dedicated to a number of special purposes as required by the constitution and state statute. Constitutional funds include the Legacy Fund, the Resources Trust Fund, and two school trust funds. Statutory funds include the Strategic Investments and Improvements Fund and the Property Tax Relief Fund. Political subdivisions and tribes also receive oil revenues directly. None of these other funds are available for General Fund spending purposes.
One-time General Fund Expenditures
We also propose for the 2013-2015 biennium, $991 million in General Fund one-time expenditures, which we can fund from our revenues not needed for ongoing program expenditures.
Some of our one-time projects are investments in roads and highways statewide, bypasses, emergency equipment and public safety, and some are dedicated to educational infrastructure. They are investments that will further stimulate economic activity, make our state more competitive, and create more good jobs in the future. They are also investments that do not need to be repeated in the future if our economy should take an unexpected turn.
As with our current budget, we exercise sound fiscal management. Our budget neither borrows nor bonds. And it imposes no new taxes or fees.
Reserves
Now let's turn to a discussion of budget reserves as shown on Chart 3. As I said, our ending fund balance will be $81 million in 2015. The Budget Stabilization Fund will be $455 million. The Foundation Aid Stabilization Fund will reach $606 million.
On July 1, 2013, North Dakota will begin the biennium with a balance of about $709 million in the Strategic Investments and Improvements Fund which will grow to a balance of $1.3 billion by June 30, 2015, even after our commitment to provide $200 million in school construction loans. It is important to note that all of these reserve funds are mandated by our state constitution or by state statute.
The Legacy Fund balance on June 30, 2013 will be $1.2 billion and will grow to $3 billion by the end of the biennium. The people of North Dakota created the Legacy Fund through an Initiated Constitutional Amendment. These funds are absolutely unavailable until 2017.
As you can see, North Dakota state government will remain financially strong for many years to come.
Expanded Tax Relief
With our ongoing and one-time expenditures accounted for, and our reserves secured, our financial position still provides us with the resources necessary to provide additional tax relief for North Dakota citizens, as shown on Chart 4.
In the last biennium, we reduced property taxes by $342 million through a reduction of approximately 75 mills in school district levies, simultaneously raising the state's share of school funding. In this budget we are proposing that we increase the state's share of school funding again and provide even more tax relief to our citizens by lowering the property tax in an average school district by an additional 60 mills. Altogether our taxpayers will save $714 million in property taxes from both mill levy reductions. Furthermore, we are proposing that the total property tax relief for the upcoming biennium be made a permanent part of the state school funding formula and the local share of the cost of education be permanently reduced. This level of property tax relief is sustainable far into the future and is what the people of North Dakota want.
But we can and should do more. We also propose providing $100 million in individual income tax relief on top of the $210 million in relief provided in the two previous legislative sessions. Altogether we will reduce income taxes by nearly 40 percent from the rates paid in 2009.
In addition to individual income tax relief, we propose to expand the Homestead Tax Credit to help many more senior citizens and the disabled stay in their homes long after they retire. We can do this by increasing the allowable income threshold from $26,000 to $50,000, disregarding social security income, and by eliminating the asset test. People should not be penalized for doing a good job of saving. These changes are estimated to save qualifying property taxpayers an additional $20 million per biennium.
Finally, we are recommending that we provide an additional $25 million in corporate income tax relief to attract and retain job creators, in addition to the $35 million in tax relief provided in the two previous sessions.
It is important that the hard-working men and women of North Dakota see a substantial share of our economic gains reflected in their tax bills. By 2015, our taxpaying citizens will have received $2.1 billion in tax savings over three bienniums. And this is based on original fiscal notes that do not take into account rising income levels.
Now that we've reviewed the overall structure for our budget, let's take a closer look at the individual funding priorities within the budget that will help us to maintain and support our growth.
A good place to begin is with North Dakota's growing infrastructure needs.
Statewide Infrastructure Needs
New economic growth cannot be supported without robust investments in infrastructure, and our budget addresses infrastructure needs in every region of the state. Transportation investments alone come to $2.5 billion statewide. In addition, we are committed to flood prevention in Fargo, Valley City, Lisbon, and of course, Minot. We will continue to lower Devils Lake without harming downstream communities. We will push for water supply projects throughout the state, and make many other public and private sector infrastructure investments.
Let's review the statewide plan, beginning with western North Dakota.
Infrastructure Support for Western North Dakota
While jobs and population growth have been a significant benefit to our western counties, the extreme wear and tear on roads, and the need for housing and water, requires an even greater commitment to infrastructure investment. Chart 5 illustrates what we have in mind.
We propose once again dedicating $142 million in one-time funding for oil counties and townships that need assistance repairing roads damaged by extraordinary truck traffic.
These funds will be distributed to counties based on road conditions identified by the Upper Great Plains Transportation Institute and by DOT observations. Further, we recommend that the legislature approve these funds with an emergency clause to enable the affected communities to commence projects immediately.
We also propose increasing funding for the Oil and Gas Impact Grant Fund to $214 million. All entities experiencing impacts from oil and gas development can apply for funding to help mitigate those effects.
It's important to mention that this funding goes beyond roads and highways. It's also used to address the pressing need for housing infrastructure, including city streets, municipal water lines, sewer lines, and other infrastructure needed for residential construction.
These targeted funds will continue to provide great benefits to western North Dakota, but we also agree with local officials that they need a steady, reliable income stream from the oil and gas production tax to build two-year budgets and to better plan solutions to their overwhelming infrastructure needs. Therefore, we are proposing that the amount of funds available to political subdivisions through the oil tax formula be more than doubled from $247 million to $521 million. This will be accomplished by allowing every oil and gas producing county to receive 100 percent of the first $5 million in oil revenue each year. Then, instead of the counties' revenue share declining to 10 percent, we recommend they receive a constant 25 percent revenue share without any further caps or reductions. This arrangement should continue until the situation changes at some point in the future.
Special $1 Billion Fund for Infrastructure
Throughout North Dakota, our highways are carrying the weight of incredible growth in commercial transportation and other traffic flow. To adequately support large highway projects, we recommend providing more than $1 billion in one-time investments over and above our regular DOT funding.
This amount would include one-time investments in extraordinary state highway construction and maintenance totaling $390 million. It would also include an investment of $300 million to convert two-lane highways into four-lane highways beginning with US Highway 85 between Watford City and Williston. It also includes one-time investments of $325 million for truck bypass routes and interchanges.
Infrastructure Support for Non-Oil Counties
Although the infrastructure needs of western North Dakota are great, no less important are the critical needs for road improvements outside our oil-producing region. Because we have addressed western projects with targeted funding, the remainder of the Highway Fund totaling $598 million is essentially available to the rest of the state. In addition our budget provides $100 million for roads and highways in our non-oil counties, cities, and townships, and $147 million remains available to complete projects statewide. In other words non-oil counties have not sacrificed their regular highway funding to western areas.
Altogether we are providing more than $2.5 billion for infrastructure improvements across the state. The source of this funding is primarily general fund revenues not needed for ongoing programs and all of the investments are one-time commitments that do not have to be repeated. They represent our continuing commitment to the expansion of our economy and to keeping up with the challenges of our rapid growth.
Investments in Water
Our commitment to statewide infrastructure upgrades includes continuing our important work to help meet the critical needs for flood control and water supply projects. Major flooding in the Devils Lake Basin and along all of our major rivers upended the lives of thousands of North Dakotans last year. While we move forward on flood protection projects, we must continue to provide flood recovery assistance as well.
During the last biennium the state assisted several communities impacted by 2011 flooding by providing more than $130 million for home acquisitions, flood impact grants and to fund the Rebuilders Loan Program.
The state also stepped up during the last Legislative Session to address chronic flooding in the Devils Lake Basin. We completed the Tolna Coulee control structure and built in record time a second water outlet from East Devils Lake. With two outlets operating, we can now discharge 600 cubic feet of water per second. This year alone Devils Lake dropped a total of three feet, with one foot of that drop attributed to the operation of the outlets. About 32,000 acres of farmland have been returned to landowners this year.
For flood protection in the Fargo area, we support an additional $102 million from the Resources Trust Fund while Fargo-area officials work to find a permanent solution to Red River flooding. While the Souris River Basin is studied for a permanent floodway, we support committing more than $60 million this biennium to assist with further protection and home acquisitions. In addition, we recommend extending the Rebuilders Loan Program for residents who lost their homes to flooding and still need financing to cover the costs of flood-repair work or to buy a new home.
Flooding along the Sheyenne River also has created significant hardships in the communities of Valley City, Fort Ransom, and Lisbon. We support committing $21 million to advance flood protection projects in those areas as well.
Moving forward, it is clear that we will need additional funding to continue helping communities with large water projects. Partnerships at the federal, state, and local levels will be more important than ever to advance these costly flood control projects statewide.
Water Supply Projects
Along with flood protection projects, the state remains committed to providing communities with quality water supplies. Due to the increased flows from the Devils Lake outlets, the state provided Valley City with more than $15 million this biennium for a state-of-the-art water treatment plant. In addition, the state will continue to support funding for Fargo's water treatment plant as well as regional and rural water supply projects like Western Area Water Supply, Northwest Area Water Supply, and the Southwest Pipeline Project.
Water control and water supply are vital to the future of our state. In all, we are requesting spending authority for more than $500 million - primarily from the Resources Trust Fund - for essential water projects throughout North Dakota. My thanks to the members of the Water Coalition who have worked very hard to help us put forward an outstanding water management plan.
Preparing Our Youth For Tomorrow
Education
Over the past two years there has been a great deal of discussion about our state's natural resources. But we all know that the state's greatest resource is our own people. Educating and training our citizens is the key to lasting prosperity for everyone.
Much of this work was begun by the Governor's Commission on Education Improvement, which I had the honor of chairing for six years. Our work brought about the greatest reform of K-12 funding in our history, and now we must finish the task.
K-12 Education
After achieving a new foundation of equity in school funding in 2007, the commission continued its work on adequacy in 2009 and 2011 which means a guaranteed amount of funding to provide a quality education to each and every student.
Now, because of the great work done in the last three bienniums and because of the resources we have available, we can achieve a fully integrated formula for K-12 funding. This formula will continue the strong financial commitment to educating each North Dakota student regardless of where they live or how property poor their school district happens to be. It also ends the excessive dependence on local property tax which has become a heavy burden for our people.
We propose ending the mill levy buydown program even as we provide an additional 60 mills of property tax relief on top of the 75 mills we currently provide. This will eliminate the side effect of an automatic increase in state paid tax relief due to rising property valuations. We also propose that state aid grants have no connection whatsoever to historic school mill levies. This funding model is sustainable far into the future and will result in local districts needing to levy no more than 60 mills in most cases.
Our K-12 funding proposal, as shown in Chart 6, provides an increase of $549 million over the current biennium. Of the total increase, $372 million will provide for local property tax relief. Other funding increases include: $27 million to continue the current payment levels; $53 million to cover the added cost of increased student enrollment across the state; $74 million for increased per-student payments; $5 million for transportation; and $17 million for rapid enrollment grants.
This plan will ensure that our students get the education they need to be well prepared for college and careers.
Higher Education
Our strong revenues also give us the opportunity to invest more in our system of higher education. We know the payback from advanced education is outstanding, but our spending principles remain the same as in all of state government: ongoing spending must be sustainable in the event of an economic downturn.
Higher education in North Dakota has suffered in the last two years from a series of unfortunate distractions which diverted attention away from the great progress we are making. We have one of the most highly regarded systems of colleges and universities in the nation. A very large percentage of our high school graduates achieve an advanced degree in our state. And our institutions are consistently ranked among the best education values in America. In other words, the best education for the price.
We should be proud of our system of higher education, and yet many people seem not to be. Our progress has been overshadowed by growing concerns and mistrust about the transparency and fairness of our higher education funding. For many years, we have funded our eleven campuses on the basis of past appropriations and there has been criticism that our current funding is not based on the actual cost of educating students.
These issues can and must be solved. A group of campus business managers and V.P.s of finance have been working on a new model for distributing state funds to our eleven campuses. It is based on a fixed dollar amount per student credit hour completed. Credit hours are adjusted with cost factors based on actual spending in recent years that reflect the added costs of certain programs and the added costs of advanced levels of study. It pays only for courses completed, and not for enrollments leading to dropped classes. All campuses have been able to come to a consensus on the relative costs of each type of student.
Because this formula is more transparent, because it is more easily understood, and because it is based on the actual costs of education, we are basing our budget recommendation for higher education on this improved method of distribution. The recommendation funds many of the requests for enhancements including expanded mental health services and improved campus security. The funding also includes the cost of transitioning to the new formula in such a way that no institution receives a decrease in funding from the current biennium, even before enhancements and salary increases are added. We are recommending an increase of $89 million in funding for higher education, but of that amount $12 million represents the cost to continue current operations. We have budgeted $21 million which is needed to transition to a new formula, and about $6 million is needed to expand our scholarship programs.
The merit-based scholarship program, which rewards students for good grades and ACT scores, has been very successful and is recommended at a level of $10,000 per student rather than today's limit of $6,000. We also recommend a 10 percent funding increase for needs-based scholarships. By enhancing these scholarship programs, we will commit nearly $35 million to help students cover the costs of postsecondary education in North Dakota. We need to keep up our pattern of increasing aid to students who have no options other than incurring more debt.
The students at our institutions of higher learning need a high quality learning environment to achieve academic success. They deserve our support and our strong commitment to invest in their facilities. That is why we are recommending historic investments in capital improvements at our eleven institutions in 2013-2015.
We propose investing $68 million in the Option 2 plan for a new medical school building in Grand Forks. The medical school is highly acclaimed for its success in preparing quality doctors for family practice, and this project will help us serve all the healthcare needs of our growing population.
The same holds true for our budgeting of $6 million to expand the Erlandson Technical Center at Lake Region State College in Devils Lake. By expanding Lake Region's nursing program, we can help meet the growing demand for nurses in our rural hospitals and long-term care facilities. Eighty-eight percent of the nursing school students that have graduated from Lake Region in the past six years are working in the healthcare field -- right here in North Dakota.
Additionally, our budget plan includes $12 million for a complete renovation of the UND law school. This project is overdue. It's needed to satisfy code requirements and to meet accreditation standards.
We also recommend $29 million for an academic building on the North Dakota State University campus which will be dedicated to the fields of science, technology, engineering and math. At a time when our state needs more professionals in the STEM fields, NDSU doesn't have enough labs and classrooms to meet the needs of these disciplines.
Our one-time investments include $13.3 million to replace the library at Bismarck State College. This new facility will not only house the college's library, but also include additional space for the college's communications department and arts department.
Other recommended, one-time capital improvements include: $5.8 million to renovate the gymnasium at Mayville State University; $8.5 million for the demolition of two buildings and the renovation of Old Main at the North Dakota State College of Science; $12.2 million for the renovation of Stevens Hall at Williston State College; and $3.6 million to renovate Vangstad Hall at Valley City State University.
These investments in our people will pay back again and again for decades to come.
Stimulating Philanthropy
The growing prosperity of our state has presented a new opportunity to help our colleges and universities in a significant way. Our robust economy is creating new wealth in North Dakota and we propose funding a matching grant program designed to stimulate the spirit of philanthropy for our colleges and universities.
We recommend providing $30 million in one-time funding to create Education Challenge, a matching grant fund for academic enhancements at our colleges and universities. Every $2 in private donations will be matched with $1 in state funding. Private gifts would have to reach certain thresholds before becoming eligible for matching grants. State funds would be allocated according to institution type. This matching grant program will provide a strong incentive to keep large charitable gifts coming to our North Dakota institutions rather than to other out-of-state causes.
Economic Development
Our efforts in economic development have evolved from a strict emphasis on job creation to an expanded mission that includes workforce development and quality-of-life considerations. To further pursue this expanded mission, we teamed up this past year with the North Dakota Chamber of Commerce on a strategic visioning exercise called 2020 and Beyond. We held nine open meetings across the state. From that process came 1,700 individual ideas and some common themes as well.
The results centered on three quality-of-life targets: people, places and opportunities. In discussions focused on investments in people, the overriding message was a need for more childcare services. We are recommending that the Department of Commerce administer a $5-million grant program to assist in the development of new and expanding childcare facilities statewide. This concept is being used today in cooperation with political subdivisions and private childcare providers in oil country.
Feedback regarding job opportunities confirmed our decision to recommend $12 million in matching grants for a new job creation initiative called Research ND. Unlike its predecessor, the Center of Excellence program, these funds will be matched only with private sector cash investments. Businesses will cooperate with our research universities but will not be required to form new Centers.
Agriculture is North Dakota's largest industry and we must support its ongoing development so that our farmers and ranchers continue to be among the world's most efficient and successful producers. Our budget for agricultural research and development includes $4.3 million to build new agronomy laboratories at NDSU research centers in Hettinger and Carrington. We recommend additional funding of $4.8 million to enhance research capacity with an emphasis on crop development and protection. Research investments in agriculture continue to pay back to our state many times over.
Quality Of Life and Taking Care of People
As we focus on competitiveness and the details of building a strong economy, we must not lose sight of the fact that our ultimate objective is a higher standard of living and a better quality of life for all North Dakotans.
Law Enforcement and Public Safety
As North Dakota grows, in both commercial activity and population, we are committed to keeping North Dakota one of the safest states in America.
That's why our budget includes significant funding enhancements for law enforcement and other public safety measures. Our budget includes $3.8 million for 15 additional Highway Patrol troopers and $6.6 million to complete the first phase of a new law enforcement training academy. These new troopers will patrol state highways across North Dakota and particularly roadways in our oil-producing region. They will support local law enforcement agencies and enhance our enforcement of motor carrier restrictions.
We are also recommending requests from the Attorney General's Office and the Judicial Branch to fund more positions that will strengthen the Bureau of Criminal Investigation and our district courts.
Additionally, our budget includes about $4 million for 23 new positions within the Industrial Commission's Oil & Gas Division. These additional positions include petroleum engineers and field inspectors to further ensure safety and environmental regulations are followed at drilling and well sites. Our budget also includes funding for additional staff within the Department of Health for greater protections against environmental hazards and public health threats.
Our commitment to providing the people of North Dakota with quality public safety includes additional funding to enhance state radio and to increase state grants for fire districts and emergency management services across the state.
In all, our budget recommends funding for 171 additional employees. Of these new positions, 153 are for law enforcement, public safety, and public health, most of which are made necessary by the rapid development in our oil-producing counties. These positions are necessary for the public's safety and to maintain the proper regulatory oversight that goes along with managing a growing economy.
Health and Human Services
It has been said that any society can ultimately be judged by how well it takes care of its people. Our budget also provides for the needs of our seniors, our veterans, our disabled citizens, and the less fortunate.
During the 2013-2015 biennium, the state will receive $93 million less in federal funding for Medicaid reimbursements and other medical assistance coverage. This reduction in federal funding is the result of North Dakota's continued growth in per capita income. We must make up the loss with state funds because cutting benefits to those in need of healthcare is not an option.
We also recommend providing an additional $1 million to enhance guardianship services that help ensure the protection and dignity of North Dakota's growing senior population and our most vulnerable citizens. Our budget also includes additional funding to offset increased costs at our rural health clinics and critical access hospitals; to meet increased needs for chemical dependency treatment and mental illness; and to enhance programs that deliver meals to senior citizens and allow them to remain in their homes. Long-term Care and other Healthcare Providers
Our budget also provides a 4-percent inflationary increase for each year of the biennium to nursing homes, healthcare providers, and providers serving people with developmental disabilities and mental illness. Additionally, we funded a wage increase of 50 cents an hour for frontline caregivers. We must help our providers address rising costs and maintain a high standard of care.
Military and Veterans
For our veterans and our men and women in uniform our deepest gratitude is not enough. We must also show them our appreciation in tangible ways.
In past legislative sessions, we have established the Veterans' Bonus Program, including bonus pay for overseas and domestic deployments. We established a tuition waiver program and funding for counselors to assist our soldiers and their families, and we've built and enhanced funding for the North Dakota Veterans Home in Lisbon. Last year, we added a new outreach center for veterans and service men and women in Fargo, and we continue to support our veterans of all wars in their senior years.
Our budget maintains full funding for all of these programs and enhances veterans' support despite reductions in federal funding.
Whether fighting floods here in North Dakota or serving overseas, the North Dakota National Guard and all of our branches of military service make possible the way of life we enjoy today. Would all veterans in the audience who have served us so well please stand so that we may express our gratitude for your service.
Public Employee Salaries and Health Insurance
Sound fiscal management also allows us to provide our state employees the compensation they deserve.
As directed by the 62nd Legislature, our recommendation for state employee compensation is not presented as a statewide percentage increase, but rather is based on dollar amounts determined necessary for competitive compensation. The appropriation allocations are based on employees' performance and their relative position in the market.
Employees who meet set performance standards will be eligible for a performance increase of 3 percent each year and those employees exceeding performance standards are eligible for an increase of up to 5 percent. In addition, employees whose current compensation is farthest from market are eligible to receive an additional increase between 1 percent and 4 percent, depending on their position in the salary range. This compensation factor is intended to alleviate compression created by our new salary ranges. The general fund cost of this salary package is $50.8 million.
The compensation package continues full health insurance for state employees and their families, and recommends an increase in contributions to the retirement system of 2 percent each year of the biennium with the cost evenly split between employees and the state.
We have also funded a 4 percent annual salary increase with pension contributions and full health insurance for employees of the university system.
The men and women who serve in our agencies and institutions of higher learning are hard-working North Dakotans, and we appreciate their dedication.
Expanding Housing Development
One of the main challenges created by North Dakota's strong economy and population growth is the challenge of keeping pace with the state's housing needs, and in 2011 we enhanced substantially housing incentives that are producing results.
Our budget recommends increasing the state's Housing Incentive Fund to allow for $20 million in state income tax credits. Citizens and businesses that invest in the fund receive a state income tax break of equal value. Developers access this source of low-interest loans in exchange for providing housing for low- and moderate-income residents. We also propose transferring $30 million in one-time funding for a direct investment in the Housing Incentive Fund to accelerate the availability of funds for housing development.
We also recommend providing an additional $12 million in Flex PACE buydown funds to support residential construction. This investment is a strong incentive for builders, and it will generate an estimated $125 million in private housing development. A good supply of housing is an essential ingredient in our quality of life.
Preserving North Dakota's Outdoors
The outdoor experience and the tradition of hunting in North Dakota are also core elements in our quality of life.
The challenges created by a growing population and expanding commercial development include greater risks to our outdoors, and that's why we are including in our budget a proposal to establish a permanent conservation fund to enhance the opportunities for hunting and all outdoor recreation experiences.
Our budget calls for committing a portion of funds generated by oil production taxes to a newly created conservation fund, with an annual funding cap of $10 million. We propose creating an advisory committee made up of a diverse group of stakeholders to administer a grant program under the direction of the Industrial Commission. The committee will award grants to state agencies and non-profit groups to benefit statewide conservation practices, wildlife habitat, parks, and outdoor recreation. Our quality of life in North Dakota should not be compromised because of our rapid growth.
Creating Our Future Together
Since presenting the budget message to you two years ago this week, we have made tremendous progress on all of our objectives. Our strategy for tax relief, funding our priorities with an emphasis on infrastructure, and setting aside adequate reserves has put us in a great position to manage the growth of our state for years to come.
I look forward to working with all of you, and the people of our state, to capitalize on our success and create our future together.
Thank you. May God bless you as you undertake this important work for the people of North Dakota.


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