The Senate Appropriations — Education and Environment Division laid out preliminary numbers for the state water budget and related project buckets during a committee meeting, proposing a $100 million use of carryover and a $150 million line of credit to cover near-term needs while revenues remain lower than earlier forecasts.

The committee’s chair, Chairman Zorwaug of the Appropriations — Education and Environment Division, opened the discussion by saying, "We're gonna go through the water budget today," and presented a spreadsheet the committee will use as a starting point. He and department staff emphasized the numbers are preliminary and subject to change.

Why it matters: the Resource Trust Fund balance available for water projects has dropped from the House’s January forecast, changing which projects can be funded this biennium and prompting proposed reductions and policy adjustments. The committee’s proposal preserves major regional commitments while reducing or postponing other line items and asking agencies to identify operating savings.

Key numbers and fiscal context

- Resource Trust Fund: committee staff reported a current available balance of $354,500,000. Chairman Zorwaug contrasted that with the House January forecast of $448,210,000, describing the difference as a $93,700,000 reduction.

- Causes of the reduction: committee materials noted about $22,790,000 (roughly 24 percent of the reduction) tied to price movements and the remainder largely attributable to lower revenue from stripper-well oil production; committee staff said roughly $71,000,000 of the reduction is due to stripper-well impacts.

- Other revenue items: the staff sheet showed $29,000,000 of additional funds (identified as $13,000,000 from Southwest repayments and $16,000,000 in investment income) that the committee expected to remain available.

- Turnbacks/Utilities: Chris Katamus, Director of Administration for the Department of Water Resources, confirmed that $15.06 million shown on the worksheet represents anticipated turnback dollars, largely from unspent professional services and utilities.

- Overall cash figure cited: committee materials listed $4,441,600,000 as a cash-available figure the committee would use for planning (committee members and staff described this as a working, moment-in-time number).

Committee proposal and department reductions

- Carryover and line of credit: the Senate proposal on the table would use $100,000,000 in carryover dollars and establish a $150,000,000 line of credit. The committee said $50,000,000 of that line of credit would be targeted to the Southwest pipeline’s water-treatment plant, with the remaining $100,000,000 intended as an overdraft/backstop.

- Project adjustments: Chairman Zorwaug walked through preliminary reductions for specific projects (examples included reductions to Southwest pipeline construction lines, a smaller allocation than the House for the Red River Valley project, and adjusted amounts for municipal, rural, and conveyance buckets). He repeatedly characterized the sheet as a starting point for further committee discussion.

- Department operating reductions and authority requests: Rhys Hals, Director of the Department of Water Resources, told the committee the department identified about $1.2 million in salary and operating savings by removing two requested FTEs from the budget and by shifting certain work. "Removing those 2 FTEs from our budget at this time would make sense," Hals said, adding the department would request interim authority to accept federal funds and reinstate positions if federal dollars become available.

- Studies and program changes: Hals asked that the Missouri River intake study be removed from operating and instead be added as an interim legislative study funded from discretionary dollars, which the department estimates would save about $600,000 in the current package. He also flagged the likely consolidation of the Board of Water Well Contractors into the Department (a change included in a governor’s boards-and-commissions bill), noting the board currently operates on special funds and the department would need authority to assume those special funds.

- Equipment and construction work: committee members questioned a $400,000 excavator request. Sindhu (Water Development Division, Construction Section) explained the division performs construction and maintenance projects under the public-improvement threshold and that the division can "do projects less than the public improvement threshold of $200,000" and uses its construction equipment for dam repairs and extraordinary maintenance. Rhys and Sindhu said department staff judged ownership more efficient than repeated rentals because of mobilization and service delays.

Policy and statutory notes raised at the hearing

- Emergency clause request: Hals asked the committee to add an emergency clause for the Drought Disaster Livestock Program tied to House Bill 1040 since that bill, as passed, did not include an emergency clause; adding the clause in the budget bill would allow the department to respond more quickly to drought events.

- Bank of North Dakota language: the department requested clarifying language to make certain line-of-credit provisions permissive ("may") rather than mandatory to address concerns the bank raised about regulatory constraints.

Committee process and next steps

Committee members and staff stressed this was a working set of numbers, not final appropriations. Chairman Zorwaug repeatedly asked members to review the spreadsheet, noting the allocations will be revisited in further hearings: "This is not the final numbers," he said. Committee members asked for time to digest the reductions and to coordinate changes, and staff said they would return to water-portfolio discussions later next week.

Discussion vs. formal action

- Discussion: the meeting consisted of staff presentations and committee discussion of revenue impacts, proposed project reductions, and departmental operating savings. Committee members questioned department staff about specific equipment requests, FTEs, and the practicality of certain project funding levels.

- Direction: committee leadership presented a preliminary plan (buckets and proposed cuts) and asked the Department of Water Resources to identify operating savings; the department requested statutory authority language and an emergency clause for an existing drought program.

- Formal action: the transcript did not record any motions or roll-call votes on budget items during this session; all numbers were presented as proposals for future action.

Quotes

- "We're gonna go through the water budget today," Chairman Zorwaug said as the committee opened the session.

- "It's anticipated turn back and largely due to unspent professional services and utilities," said Chris Katamus, Director of Administration for the Department of Water Resources, describing the $15.06 million turnback figure.

- "Removing those 2 FTEs from our budget at this time would make sense," Rhys Hals, Director of the Department of Water Resources, told the committee when describing proposed operating reductions; Hals also asked for interim authority to accept federal funds should they materialize.

- "We can do projects less than the public improvement threshold of $200,000 right now," Sindhu of the Water Development Division said in explaining why the department uses in-house equipment and staff for certain construction tasks.

What the committee did not decide

No final appropriations, motions, or roll-call votes were recorded in the transcript. Committee members repeatedly characterized the figures as preliminary and subject to change pending further hearings and updated revenue forecasts.

Context and background

Committee members and staff said the revenue picture shifted after updated March forecasts and that revenue losses tied to stripper wells are likely to be structural unless statutory tax rules change. Chairman Zorwaug and staff emphasized that the Senate proposal uses more conservative carryover and credit assumptions than the House numbers and that the committee is attempting to preserve long-term project commitments while recognizing a smaller near-term revenue base.

Next steps

The committee will schedule further water-budget review; staff committed to circulating updated sheets and to reconvening to work through sections and project buckets once members have had time to digest the preliminary allocations and proposed statutory language.

Votes at a glance

No formal votes were recorded in the transcript.