ND Legacy Fund principal likely safe from spending in 2017, leaders say
BISMARCK - North Dakota lawmakers will likely keep their hands off the state's $3 billion-plus Legacy Fund when it becomes available for spending in 2017, GOP and Democratic legislative leaders agreed Thursday. But while the fund's principal is p...
BISMARCK - North Dakota lawmakers will likely keep their hands off the state's $3 billion-plus Legacy Fund when it becomes available for spending in 2017, GOP and Democratic legislative leaders agreed Thursday.
But while the fund's principal is probably safe from spending, its interest earnings may not be.
"The earnings, we'll wait and see," Senate Majority Leader Rich Wardner, R-Dickinson, said Thursday at the Greater North Dakota Chamber's policy summit in Bismarck. "If we didn't have this downturn in oil prices, that wouldn't even be a question."
North Dakota voters approved a constitutional amendment in 2010 to set aside 30 percent of the state's taxes on oil and gas production and extraction starting in 2011.
There were no guidelines on how to spend the money, but it can't be tapped until after June 30, 2017.
With that seven-year hands-off period coming to an end, "there's people drooling all over that fund," said House Majority Leader Al Carlson, R-Fargo. But he says the state has other reserve funds to meet any short-term needs.
"Unless we absolutely need it, we shouldn't touch it," he said.
With earnings, the fund's total balance was $3.312 billion at the end of May, state Treasurer Kelly Schmidt said.
While its rate of growth has slowed, Carlson said the fund is expected to reach $4.3 billion by the time the Legislature meets again in January 2017.
After June 30, 2017, the treasurer must transfer Legacy Fund earnings to the state's general fund. The Legislature passed a bill in April requiring that those earnings be immediately invested back into the fund's principal, but Gov. Jack Dalrymple vetoed the bill, writing that it "would clearly contradict the intent of the voters."
During Thursday's debate, Democrats agreed that lawmakers should let the principal grow for as long as they can, but they stressed the need for more planning on how to use the fund's earnings. Last session, a bipartisan attempt to create a foundation to guide the future of the Legacy Fund failed to pass.
"I think that's certainly something we need to look at," said Assistant Senate Minority Leader Joan Heckaman, D-New Rockford.
Lawmakers did call for a study of how to reinvest and spend the fund's earnings. But without an independent group to help prioritize spending, House Minority Leader Kenton Onstad, D-Parshall, cautioned that spending proposals from the Legacy Fund could become provincial.
"I see it as becoming east against west, urban against rural, and we don't want that," he said.
He said the state needs innovative ideas for the fund to help diversify the state's economy.
Comments and questions submitted via text message by the audience of about 200 businesspeople and others ranged from questions about education spending to the suggestion, "Let's buy the Vikings," which was quickly followed by, "Not the Vikings. Let's buy the Broncos."
Wardner was the only panelist to opine on how big the Legacy Fund needs to grow, saying it should be at least $45 billion to $50 billion to meet future needs with only the earnings.
If there was an attempt to spend part of the principal, it would require two-thirds approval in both the House and Senate. Not more than 15 percent of the principal can be spent during a biennium.
Greater North Dakota Chamber President and CEO Andy Peterson said the organization hasn't taken a stance on how the fund should be spent, but it favors keeping taxes low and investing in initiatives such as a world-class education system.
The chamber opposes tapping the fund's principal, he said.
"We want to make sure that stays there for future generations, because you can always earn money," he said. "If we go there, it's all over."