Great to hear from Gov. Doug Burgum in the 2020 State of the State message that North Dakota's Legacy Fund is growing, now at $6.8 billion. He mentioned that Norway’s Sovereign Fund is over $1 trillion. We discovered this when I traveled with a group of leaders from various industries in our region participating in a Smart Innovations Learning Tour to Norway. The tour helped give us perspective about how a small oil producing country invests revenues from their oil resources in people first. The results:
- Much lower deficits (The U.S. deficit is now at $22 trillion)
- Lower health care costs with better outcomes
- Highly competitive markets as entrepreneurs don't have to worry about figuring out health insurance for their employees
- Incorporating arts and culture into their economic development strategies
- Consistent high quality of life rankings and 2017 they ranked "happiest country"
North Dakota produces 5 times more oil per capita than Norway. Norway started their oil sovereign fund in 1990 and now has over $1 trillion dollars in the fund. They invest the proceeds of their oil permits and extraction taxes in various markets. Recently they’ve been divesting their fund away from oil-related investments so they’re not overly weighted in the sector, and they still produce over 1.7 million barrels a day compared to North Dakota’s 1.5 million barrels a day.
- Letter: The Legacy Fund is not meant to be a tax break for millionaires
- Letter: An idea for North Dakota's Legacy Fund
In North Dakota, oil sells for $40 a barrel x $1,500,0000 barrels a day, that is $60,000,000 a day. Multiply that by 1.5% equals $900,000 a day and $328,500,000 a year.
Norway exports their oil, but they don't export their wealth as we often do in North Dakota. They preserve the principal and invest some of the interest into people with quality health care for all that has better outcomes at a lower cost, quality education, and they embrace technology to improve quality of life. They are working to protect their environment with cleaner, more efficient energies and lowered emissions with a goal of net zero CO2 by 2030.
So, what can we do here? A good first step would be for North Dakota to restore the oil extraction tax to 6.5% that was initiated by citizens and passed in 1980. That was the rate until legislators arbitrarily reduced it to 5% in passing HB1476 in 2015. If the extraction taxes were restored to the level citizens initiated in 1980 to 6.5%, the state would have collected $815 million more in oil tax revenue from January 2016 to January 2019.
Let’s take a lesson from Norway and their Sovereign Wealth Fund. Use half of biennium interest of the fund for needed items and the rest to grow the Legacy Fund principal. Restoring the oil extraction tax rate would bring in over $900,000 a day to the fund. As the fund grows, continue to invest half of the interest into people with quality health care, education and protecting our environment and growing our economy with cleaner energies and lower emissions. This will sustainably grow the economy to invest in the best economic development strategy there is, investing in our people.