Gov. Kelly Armstrong unveiled a $19.89 billion executive budget for 2025-27 at a Joint House-Senate Appropriations Committee meeting Wednesday.

The budget is close to the $19.6 billion executive budget released by former governor Doug Burgum in December. Armstrong’s budget includes a $6.6 billion general fund budget, which compares to Burgum’s $6.5 billion proposal and the current $6.1 billion budget.

“Throughout agency budgets we cut a lot of spending on new programs. We’re going to focus on the core functions of government, and in the future, we are looking at legacy programs,” Armstrong said. “I’m less concerned about spending more and I’m less concerned about spending less. What I am concerned about is spending wisely and making sure we are investing strategically to make the best use of tax dollars now and in the future.”

The budget includes $483.4 million for Armstrong’s property tax relief and reform plan, $464 million in bonding for construction projects, $44.3 million for Education Savings Accounts, $50 million for higher education Challenge Grants and $16.1 million to staff and operate the Grand Forks County Correctional Center’s expansion as an immediate, temporary solution to lack of prison space.

Armstrong reviewed the property tax reform plan he had introduced at the State of the State Address Jan. 7. The plan would provide a property tax credit of $1,550 each year of the 2025-27 biennium for primary residences. It would be funded with $310 million from the general fund and $173.4 million from Legacy Fund earnings.

“Using the Legacy Fund earnings will not only grow the credit over time but also reduce the general fund costs in future biennium, until Legacy Fund earnings ultimately cover the entire cost of the relief,” Armstrong said. “The plan caps future increases in local property tax budgets at 3% per year. They don’t have to use the entire 3% increase every year. Whatever percentage they don’t use each year. They can bank it for a period up to five years.”

Minot City Council member Mike Blessum, who testified before a legislative committee against the governor’s tax reform proposal, said the tax relief is the wrong course.

“It really still entangles the state very, very deeply in property tax, and I think that’s a dangerous course,” Blessum said. “I”ve been very clear that I am all for lowering our budgets locally and really tightening our fiscal belts. At the same time, those caps and that thumb on the scale from the state level is not helpful to the local subdivisions.”

He said the plan could lead to subdivisions levying a 3% increase every year in fear of falling behind or saving up for later, resulting in large tax fluctuations.

The governor’s plan has the goal of eliminating property taxes on primary residences, unlike Measure 4, which voters rejected in November. The measure would have eliminated taxes on all properties, including apartment buildings, agricultural land and commercial properties.

“So, the Measure 4 proponents, they are not going to be satisfied with the governor’s plan, though they may see it as some step in the right direction,” Blessum said.

Armstrong’s executive budget also provides 2% annual increases in K-12 education funding, costing $60 million. Armstrong proposes removing the transition minimum factor, which dates to 2013 when the Legislature created minimum payments to reduce the impact of a school funding formula change. The Legislature has been phasing out the payments over the past few bienniums. Fifty school districts still receive them.

TGU School District has seen declining payments and is to receive $167,523 this year.

“It’s something we have known is coming,” Erk Sveet, superintendent at TGU in Towner, said of an eventual end to the payment. “It definitely increases the burden on our local taxpayers, but it’s something that we have been preparing for.”

Armstrong’s budget also proposes $44.3 million to establish an Education Savings Account program that reimburses for approved, supplemental services and supports, such as tutoring and mental health therapy.

“This will expand educational opportunities to directly impact student learning and well-being for public, non-public and homeschool students,” Armstrong said.

The executive budget includes a $75 million transfer from the Foundation Aid Stabilization Fund to the School Construction Revolving Loan Fund to help finance new facilities.

Among other budget highlights are $36.5 million to finish the Heart River Correctional Center for Women and $23 million for planning and design of the new Missouri River Correctional Center (MRCC). The executive budget includes $16 million to operate the expansion at the Grand Forks County Correction Center, making 90 beds available to the state by July 1, and $9.3 million for a temporary housing facility at MRCC, making 88 beds available by July 1, 2026.

“Between these two facilities, this is the cheapest and fastest way to relieve pressure on our overcrowded correctional facilities,” Armstrong said. “We also know we can’t build our way out of incarceration. We need practical solutions that will increase access to services and not rely so much on our jails and prisons as treatment centers.”

He cited funding $19.2 million being targeted to community-based drug recovery programs.

His budget recommendation increases the oil tax allocation to the general fund from $460 million to $500 million to ensure filling of the Prairie Dog buckets that support state and local infrastructure costs.

The budget taps the Legacy Fund earnings stream to support the Highway Distribution Fund.

“This will provide a more stable funding source that will increase over time and should alleviate the need for the 10 year strategic plan and also blunt the impact of a 3% cap on local political subs’ property growth,” Armstrong said.

The proposed 2025-27 budget leaves a general fund ending balance of $230 million and more than $500 million in the Strategic Investment and Improvements Fund. With revenue from the next biennium, the projected SIIF balance is $1.6 billion.

“We’re leaving real cushions for legislative priorities,” Armstrong said.

Oil tax revenues are projected at nearly $4.9 billion in the 2025-27 biennium, which is about $828 million less than the revised estimate from the current biennium, Armstrong said. This assumes oil prices of $62 a barrel in 2026 and $60 a barrel in 2027 and oil production of 1.15 million barrels per day in 2026 and 1.1 million barrels a day in 2027.

“These are conservative production projections. We’re optimistic we could see higher numbers with the Trump administration’s focus on responsible development in our resources to achieve not only energy independence but energy dominance,” Armstrong said. “We also propose extending the five year suspension of the Coal Conversion tax through the next biennium, recognizing the critical importance of our coal industry and providing affordable, reliable, dispatchable power for residents and businesses in North Dakota and beyond.”

Other budget highlights include:

-$464 million bonding package supported by Legacy Fund earnings for certain infrastructure investments, including $300 million for the construction of a new state hospital in Jamestown and $44.2 million to pay the state’s share of an $80 million military gallery at the North Dakota Heritage Center.

-$105 million to address housing availability and affordability, which is $10 million more than former governor Doug Burgum’s proposal and comes from reductions in other Commerce Department programs.

-More than $50 million for uncrewed aircraft systems, including $15 million to replace Chinese made drones used by state agencies.

– $17.3 million for investment in child care programs and grants, which is less than the $19 million proposed by Burgum.

-The $3.1 billion higher budget of higher education includes a 9% increase to the funding formula and $20 million for deferred campus maintenance.

-Performance-based employee raises funded by 3% increases to departments each year of the biennium. This compares to 4% performance raises the first year and 3% in the second year proposed by Burgum.