Co-ops Contribute to North Dakota's
Economic Bottom Line

By all measures of success, North Dakota's cooperative businesses contribute greatly to the state's economic health. One glance at the bottom line shows that North Dakota cooperatives provide more than 9,000 full-time jobs, contribute $88.4 million to state tax revenue and account for $5.2 billion in total business activity.

October is Co-op Month in North Dakota and across the nation. During October cooperatives place special emphasis on their unique business structure and the significant role they play in serving their members.

The latest study to highlight the economic impact cooperatives have in North Dakota was completed earlier this year by Larry Leistritz, a research specialist and professor at North Dakota State University's department of agribusiness, and Randal Coon, an applied economics research specialist.

"We discovered something that many of us already know: Cooperatives are a very vital part of North Dakota's economy," Leistritz said. "Both established co-ops, such as elevators and supply co-ops, and new generation processing co-ops are important to agriculture and rural North Dakota. Increasingly, co-ops are serving more urban areas. Co-ops have shown an ability to adapt to changes."

Leistritz notes that there are 337 cooperatives in North Dakota, with most related to agriculture (farm supply, grain handling and processing). In addition, 27 utility and 62 credit unions serve members in North Dakota. The study took a look at the contributions cooperatives overall make to the state's economy measured in terms of key economic indicators such as retail trade, personal income, total business activity, employment figures and tax revenue.

North Dakota cooperatives bolstered the state's economy in 2000 through in-state direct expenditures of more than $1.6 billion. Of that total, payroll, patronage refunds and stock retirement comprised $741.9 million, accounting for 46 percent of cooperative expenditures. Agricultural processing co-ops spent $463.6 million for raw products, reflecting the importance of agricultural processing cooperatives in obtaining higher prices for farmers.

Further number crunching showed that this in-state spending actually generated $5.2 billion in economic activity. Leistritz says the economic impact of locally-owned cooperatives is high because most of their dollars in purchases and payroll continue to "turn over" within the state.

"Cooperatives are so closely linked to the economic fabric of North Dakota," Leistritz said.

Many of these cooperatives were formed to obtain farm supplies, energy and credit at lower costs, while providing new markets for farm production. Today, processing co-ops "add value" to such commodities as sugar beets, bison and durum by making sweeteners, pasta and meat products.

Cooperatives provided 9,078 full-time jobs and 3,097 part-time jobs. Direct expenditures by cooperatives also create secondary employment in the state. The study found that cooperative operations supported another 42,290 secondary jobs in 2000.

All this economic activity generates plenty of tax revenue for North Dakota, dispelling a misconception that cooperatives do not pay taxes. Cooperatives exist to provide goods or services to their members at the lowest possible cost, not to generate a profit to pay out-of-state investors. Cooperatives pay taxes on income not allocated to members. Cooperatives return a share of their profits to their owner-members in the form of patronage refunds, which also are taxable. In addition, there are many state and local taxes that cooperatives, like any other form of business, do pay. The data from the study found that in 2000 total state taxes attributable to cooperatives were estimated to be $88.4 million. Of that total, sales and use tax collections generated $55.8 million.

Locally-owned cooperatives are meeting their goals of reducing costs for the member-owners while also increasing prices for farm production. At the same time, co-ops are keeping more income in the state to generate new economic activity. Any profit from cooperative operations also tends to remain in the state in the form of patronage refunds.

The North Dakota Coordinating Council for Cooperatives (NDCCC), working with the Quentin Burdick Center for Cooperatives, commissioned the study of the economic impact that cooperative businesses have on North Dakota.

NDCCC is a state association that supports and promotes the various cooperatives within North Dakota. Members include the North Dakota Association of Rural Electric Cooperatives, the North Dakota Association of Telephone Cooperatives, North Dakota Credit Union League, North Dakota Farmers Union, Farm Credit Services, Minn-Dak Farmers Cooperative, CHS Cooperatives (formerly Cenex Harvest States), Land Oí Lakes and CoBank.

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