Armstrong presents his proposed budget for the 2025-2027 biennium to lawmakers at the Capitol. (Mary Steurer/North Dakota Monitor)
By: Mary Steurer and Amy Dalrymple
BISMARCK, N.D. (North Dakota Monitor) – After a month in office, Gov. Kelly Armstrong on Wednesday laid out a plan he says will address property taxes, overcrowding in prisons and infrastructure for the 2025-27 biennium.
In all, Armstrong suggests a budget of roughly $19.9 billion. By comparison, former Gov. Doug Burgum’s proposed budget for the 2025-2027 biennium was $19.5 billion.
Armstrong’s proposal includes a short-term solution to add more prison beds, sets aside public money for education savings accounts, expands on Burgum’s proposal to address housing and proposes to use bonding to pay for a new State Hospital, airport projects and a new state military museum.
Armstrong said he’s not focused on whether the state spends less or spends more.
“What I am concerned about is spending wisely and making sure we are investing strategically to make the best use of taxpayer dollars now and in the future,” he said.
Addressing prison crowding
Armstrong said Grand Forks County officials reached out with an idea to reduce overcrowding within North Dakota’s prison system. The county is completing a correctional center expansion but doesn’t have funding to operate or staff it, Armstrong said.
The budget proposal includes $16.1 million for the state Department of Corrections and Rehabilitation to staff and operate the new section of the Grand Forks facility, adding 90 beds by July 1.
“The state needs the beds. This is a real quick path to it,” Colby Braun, director of the Department of Corrections and Rehabilitation, said after the speech.
Armstrong also proposes a temporary housing facility for the Missouri River Correctional Center, adding another 88 beds available by summer 2026. That’s 178 beds to the state prison system over the next two years.
“We have to relieve the pressure on the system now,” Armstrong said.
His proposal also includes:
- $36.5 million to finish the Heart River Correctional Center women’s prison facility in Mandan
- $23 million for a new Missouri River Correctional Center in Bismarck
- $16.1 million for what Armstrong called “various extraordinary repairs”
Armstrong, a former defense attorney, said he also wants to invest in behavioral health services to address the root cause of jail and prison crowding.
“We can’t build our way out of incarceration,” he said.
Armstrong’s budget also carves out $19.2 million for behavioral health under the North Dakota Department of Health and Human Services, including:
- $6.9 million to expand Free through Recovery, Community Connect and peer support programs
- $7.8 million to support for youth crisis programs
- $2.5 million for the agency’s substance use disorder voucher program, which helps low-income North Dakotans pay for addiction treatment services like screening, therapy and room and board
- $2 million for rural crisis support
During his State of the State Address, Armstrong also announced the creation of a new Cabinet position, the commissioner of Recovery and Re-Entry, which he said will straddle areas including corrections, health and human services and the judiciary.
Housing and infrastructure
Armstrong’s plan sets aside $105 million to address housing issues — about $10 million more than Burgum’s proposed budget.
That includes $50 million for a new program under the North Dakota Department of Commerce called under the Housing for Opportunity, Mobility and Empowerment, or HOME. Armstrong described the program as a “public-private partnership” that, if greenlit by the Legislature, would put $150 million in combined investment funding toward housing.
The governor’s proposal also includes $35 million for the Housing Incentive Fund, $10 million of which would go toward addressing homelessness.
A $464 million bonding package would fund three different infrastructure projects, including:
- $300 million for a new State Hospital in Jamestown,
- $120 million for airport projects in Fargo, Grand Forks and Dickinson and
- $44.2 million for the new military museum planned for the Capitol grounds
Rep. Don Vigesaa, chair of the House Appropriations Committee, said Armstrong’s proposal to use bonding to pay for some major projects will require more discussion by lawmakers.
“It does give me a little pause when we’re going to have significant reserves at the end of this biennium,” said Vigesaa, R-Cooperstown.
However, Vigesaa added that he agreed with Armstrong that waiting on construction projects will cost the state more in the long run.
Education
The proposed budget would grow the state’s K-12 funding formula by 2% annually, or $60 million.
Armstrong’s administration recommended taking $75 million out of the state’s Foundation Aid Stabilization Fund to finance the construction of new school facilities.
Armstrong also recommended $44.3 million for a new education savings account for public, private and homeschool students.
This would allow families to pay for individual educational services for their children — like tutoring and mental health therapy, he said.
Burgum’s budget proposed $50 million for this purpose.
Armstrong’s proposal also puts $17.3 million toward child care programs and grants.
The budget for the higher education funding formula would increase by 9%, he said.
The proposal also includes $35 million for the renovation of Mayville State University’s Old Main building, which the Legislature committed to funding during the 2023-2025 biennium.
Armstrong also proposes earmarking $20 million for deferred college campus maintenance.
Another $50 million would go toward Challenge Grants for North Dakota colleges and universities.
Property tax relief
The governor recommends setting aside $483.4 million for property tax relief, which he has called a top priority for his administration.
That includes growing the state’s primary residence tax credit from $500 a year to $1,550 for the first year. Armstrong wants to fund the subsidy, which is available to most homeowners in the state, with Legacy Fund earnings. As the size of the Legacy Fund grows, the annual tax credit would increase, too.The goal is to eliminate property taxes for all North Dakotans within the next 10 years, Armstrong said.
Armstrong’s administration is also advocating for a 3% cap on annual tax increases for all property, not just residential property. Local governments would be able to “bank” unused increases for up to five years.
Tax Commissioner Brian Kroshus estimates the program will cost $535 million.
Proposed cuts
Armstrong’s proposal is about $6.6 billion from the state’s general fund, compared to Burgum’s $6.5 billion in general fund spending.
Armstrong reduced the number of new employee positions proposed compared to Burgum’s budget.
Sen. Brad Bekkedahl, R-Williston, chair of the Senate Appropriations Committee, said lawmakers will look seriously at increasing full-time state employee positions. The state added 300 positions in the current biennium, Bekkedahl said. Armstrong’s budget proposes to add 530 full-time positions, down from Burgum’s proposal of 610.
“That is a significant portion of the cost of ongoing government spending,” Bekkedahl said. “So that’s why we look at that seriously.”
Armstrong’s proposal would change how Legacy Fund earnings are calculated, increasing the amount available to spend. The proposed change would still be more conservative than how the state manages the Common Schools Trust Fund.
Half of the additional funds from Legacy Fund earnings would go toward paying off bonds, Armstrong said. The other half would increase funding available for the Legacy Earnings Highway Distribution Fund to support state and local infrastructure.
Vigesaa said lawmakers are eager to start working on the budget now that they’ve seen Armstrong’s proposals.
“Our divisions of House Appropriations have kind of been waiting for this budget so they can really start digging in,” Vigesaa said.
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