Official Newspaper of Eddy County since 1883
Official Newspaper of Eddy County since 1883
Maybe they thought the day would never come.
Back in 2010, when voters approved the Legacy Fund, 2019 felt very far away. Yet, nine years later, North Dakota is faced with a tough question: how should we spend it?
Lawmakers have floated several ideas this session, including buying down income taxes, funding research at UND and NDSU and establishing a revolving infrastructure loan fund for political subdivisions. Gov. Doug Burgum has proposed spending $300 million in Legacy Fund earnings on such projects as a Theodore Roosevelt Presidential Library and unmanned aircraft infrastructure.
Some, however, are urging caution at using the funds so soon.
“This is a one-time resource, it’s a one-time harvest, so we need to be thoughtful about how we use those funds,” said Robert Harms, who served as legal counsel for former Govs. Ed Schafer and John Hoeven.
“If we spend as if the revenue will never go down, 20, 30 years from now the people of North Dakota will be dealing with a real problem,” Harms said.
The Legacy Fund sets aside 30 percent of the state’s oil and gas tax revenue into a constitutionally protected fund for investment by the state. The fund’s earnings – interest, dividends and capital gains – became available for lawmakers to spend on June 30, 2017, making this the first session lawmakers’ have had access to the money.
Harms is a member of the Legacy Fund Founders Committee, a group of current and former lawmakers, state officials and financial experts, most of whom worked on the implementation of the Legacy Fund.
Harms said the committee left the wording of the Legacy Fund intentionally vague to allow future legislative assemblies to decide on how to best use the fund. “One year we may have infrastructure needs, another year we may have challenges with our higher education system,” Harms said.
“We thought, ‘Let the legislatures from 2019 and 2021 and 2035, let them make those decisions,’” Harms said.
The committee outlined several guiding principles on how to spend the money, including not spending the principal, saving most of the earnings and avoiding “long term commitments” for the earnings, citing previous oil busts in the 1980s and recently in 2015.
Despite the committee’s cautioning, some think it’s time to give back to the people of North Dakota.
“What we envisioned in 2009 and what we have today: they’re different,” Rep. Craig Headland, R-Montpelier, said. “I don’t think any of us envisioned the fund growing to the size it is this quickly.”
With a rapid expansion of oil activity in those early years, the Legacy Fund’s principal has grown to nearly $6 billion, according to data from the State Retirement and Investment office, which manages the fund.
Headland introduced House Bill 1530, which would have dedicated half of the fund’s earnings to buying down citizens’ income tax.
“It was the only way we could give money back to the people where they would actually see a benefit from it,” said Rep. Jeff Delzer, R-Underwood, chairman of the House Appropriations Committee and one of the bill’s sponsors.
Although the bill failed in the Senate on March 20, proponents thought it was important to let everyday citizens feel the benefit of the fund. “You create an incentive for people to want that fund to grow,” Headland said.
Some legislators want to spend the earnings. Others plead for patience.
“It absolutely is premature, as far as I’m concerned, to start making long-term commitments to the earnings,” Rep. Corey Mock, D-Grand Forks, said.
Mock is pushing House Concurrent Resolution 3055, which would automatically invest earnings back into the Legacy Fund, rather than kicking them out to the General Fund, as mandated now by the state Constitution.
“If we invested all of our earnings, so it just grows with compound interest, we’d hit $20 billion around 2029,” Mock said, numbers he based on conservative oil projections.
“If we spent all the earnings every biennium, as it’s currently set up to do, we wouldn’t hit $20 billion for another 10 years after that,” Mock said.
Mock, who touts the power of compounding interest, said the resolution has “strong bipartisan support.” He said it’s about fiscal responsibility and protecting future generations of North Dakotans from an uncertain future.
HCR 3055 passed the House with a vote of 69-23 and now awaits a decision from the Senate. It would have to be approved by voters in the 2020 election because it amends the state Constitution.
