Wednesday, March 11, 2020

March 2020 Interim Legislative Hearing Schedule

List of legislative interim hearings for March 2020

3/12  Human Services Committee
3/16  Information Technology Committee
3/18  Health Care Committee
3/18  Legislative Procedure and Arrangements Committee
3/19  Budget Section
3/24  Judiciary Committee
3/25  Water Topics Overview

Follow this link for the interactive legislative calendar where you can click on meetings to see individual agendas: https://www.legis.nd.gov/events/2020-03



Monday, March 9, 2020

'Prairie Dog' Infrastructure Funds on Pace for 2021 Construction Season for Counties



There are many watchful eyes on the progress of the buckets that need to fill to distribute $250 million in infrastructure funding to counties, townships, cities and airports. The timing of when these funds will be available to local governments has been the focus of many commission planning and budget discussions. And there’s great news; those buckets are filling up ahead of schedule by about 4%. This means local governments will more than likely see funds sooner. Large cities may receive funds by the end of 2020. But a large $400 million Strategic Investment and Infrastructure will need to fill next before dollars trickle into the bucket for counties, townships and other cities.

“Tracking ahead of forecast is always a good thing. But at this point, it’s not a great enough lead for us to change our expectations. We should still anticipate the funds for counties and townships to be available in the spring or early summer of 2021,” said NDACo Executive Director Terry Traynor.

The 2019 Legislature approved House Bill 1066, often referred to as “Operation Prairie Dog.” This reallocates up to $250 million of North Dakota’s oil and gas extraction tax to non-oil producing counties, townships and municipalities. It is intended to be a permanent formula for continued distributions for local government infrastructure projects. The municipal and county/township buckets will receive funds after state budgetary buckets are filled to statutory limits. Because the funds are based on oil and gas revenues, revenue will vary from biennium to biennium. If there is not enough revenue to fill the bucket, the funds will be distributed on a pro-rated basis at the end of a biennium.

Oil production and the price of oil factor into how fast or slow the buckets fill. The State Treasurers Office has placed a chart on their website which will be updated monthly to show the progress of revenues filling up the various buckets. The new formula went into effect August 1st and as the chart illustrates in the first five months, two buckets are full and funds are now filling up the third bucket.

Here is a quick summary of the Prairie Dog funding:

$250 million allocated to infrastructure funds
  • $20 million for airports
  • $115 million to cities
  • $115 million to non-oil producing Counties and Townships
    • $100,050,000 will go to the non-oil producing counties (based on UGPTI needs study)
    • $14,950,000 will be divided equally to townships in non-oil producing counties
    • $9,300 to each township
      • Those funds will be distributed to the county for allocation to organized townships 
  • Current forecasts show distribution of funding to counties will happen the second quarter of 2021
  • Funding intended to be a continuing appropriation
  • Eligible projects for counties: Prairie Dog funds are to specifically be used for road and bridge infrastructure (paved or unpaved, new, repair, maintenance or replacement)
  • Counties able to “carry over” prairie dog funds from year to year to use for a large project 
  • Counties to report by 11/30/22 to State Treasurer on use of Prairie Dog funds 
  • There will be a method to indicate if carrying over funds 
  • No reporting requirement for Townships
  • The nine large oil-producing counties will not receive funds through the County and Township Infrastructure Fund; however, they will continue to receive a direct monthly allocation through the gross production tax formula 
  • Large cities could possibly receive funds by the end of 2020 
  • Graph on State Treasurer’s website tracks progress of Prairie Dog funds https://www.treasurer.nd.gov/operation-prairie-doghouse-bill-1066


Friday, March 6, 2020

Counties Gathering Input on Legacy Fund Earnings

Perhaps the greatest discussion being had during the Interim is over the use of the Legacy Fund earnings. The Legacy Fund is expected to turn out $500 million in earnings available for use in the next biennium. The Legacy Fund Earnings Interim Committee has held two hearings so far, and they plan to have two additional meetings to gather input from citizens on how they would like to see this fund used.

County leaders will also be involved in this discussion. The NDACo Board of Directors recently approved a motion that a “county recommendation for the use of Legacy Fund dollars” be developed for discussion at the next Board meeting. A preliminary discussion between the Executive Board and NDACo legislative staff has taken place.

“It is critical that the “county voice” be heard on this issue, although it may be as challenging for NDACo, as it is for the Legislature, to reach consensus,” said NDACo Executive Director Terry Traynor. “Certainly, this funding could be applied to many significant needs and wants that would benefit our citizens. The questions then become: which are the most strategic, and which have broad county official support?”

Executive Board members emphasized the importance of using the earnings for one-time projects rather than investments that would increase the reliance on long-term funding from the state. Several general concepts were outlined; many of them are similar ideas, which citizens have shared at the two prior legislative hearings on the matter. Their preliminary discussion centered around a few key areas:
  • Funding for infrastructure by enhancing contributions to the highway trust fund
  • Community improvement grants for major projects
  • Social programs to address homelessness, mental health and behavioral health
  • Grants for tourism development
  • Commissioner Trudy Ruland testifies before interim legacy fund earnings committee
  • Assistance for public ambulance services
Mountrail County Commissioner Trudy Ruland testified at the Interim Legacy Fund Earnings Committee meeting in Watford City. Ruland stressed how roads and bridges have been impacted by the oil development. Recognizing the past state funding, Ruland said counties in the west are having an impossible time keeping up with road maintenance and construction needs.

“The Prairie Dog bill/GPT formula is providing revenue to the counties and townships. But the funding is falling short,” said Ruland. “A portion of the Legacy Fund earnings should be used for direct funding and to develop grants and loan programs for the counties and townships. Our goal should be the modernization and improvement of our road and bridge infrastructure, not just maintaining the status quo.” 

Several cities and schools testified on the need for construction grants for school buildings, citing the difficulty schools are having in getting bond issues passed in their communities by the majority required and their struggles over adequate space due to the growth in students.

Perhaps the greatest quote to come from the recent Interim Legacy Fund Earnings Committee meeting came from Senator Dale Patten of McKenzie County. “The Legacy Fund gives us the opportunity to say “yes” to some things that were only a dream in the past.”

Deciding what to say “yes” to will most definitely be a daunting task for legislators, as will deciding if they should re-invest a portion of the earnings back into the Legacy Fund, and how much. This maneuver would give the Legacy Fund even greater potential when oil revenues plateau and taper off. The Committee discussed having a bill drafted that would reinvest a percentage of the earnings, but a figure was not discussed.

History of Legacy Fund
The Legacy Fund at the end of 2019 was $6.86 billion, including principal of $5.94 billion and $.92 billion in earnings. North Dakota voters approved a constitutional amendment in 2010 to establish the Legacy Fund. 30% of all oil and gas tax revenue goes into the fund and becomes the principle. The revenue in the Fund is invested in various ways, and the earnings from those investments are identified separately. After 2017, the earnings from the Legacy Fund automatically transfer to the State General Fund at the end of each biennium for legislative allocation. As the earnings are based on investment returns, the amount available for each biennium may vary. $460 million was available at the end of the last biennium.

Any expenditure of the principle would need a 2/3 vote of the Legislature and would be limited to 15% of the principle. Legislative leadership has repeatedly stated they don’t believe the principle should be accessed at any level at this time.

Legacy Fund Projections The projections reflect oil and gas tax revenue deposits of $660 million per year, the same as the 2019 legislative revenue forecast for the 2019-21 biennium. Projections show $16 billion in the Fund with earnings topping $1 billion in 2030. Those projections are without reinvesting the earnings back into the Legacy Fund.


Thursday, February 13, 2020

Interim Committee Discusses Reliance of Oil Revenues on State Budget


Oil and Gas revenues have allowed the state to make may tremendous investments. But how reliant the state budget has become on oil and gas revenues was the center of discussion at the interim Government Finance Committee meeting. Legislative Council has created a presentation that provided background and facts to committee members. It provides a look at the ups and downs of the budget and reliance on oil and gas revenues. Committee members discussed how during the boom years with revenue growth and increased economic activity there was pressure for new spending and tax relief. The legislature did both by:
  • Providing property tax relief
  • Reducing individual and corporate income taxes
  • Increase spending on:
    • Infrastructure improvements for political subdivisions (housing, water, sewer, roads, bridges, airports)
    • Road repairs and improvements 
    • Schools 
    • Public Safety 
    • Human Services 
    • FMAP (formula that determines the share of Medicaid costs paid by the state) 
The legislature approved these investments when revenues were substantially more than they are now which has created a budget gap. Ongoing expenditures have exceeded ongoing revenues since the oil downturn around 2015. In the 2017 Session, Legacy Fund earnings were available, and lawmakers used $200 million of the earnings to balance the budget. It is estimated the 2019-21 general fund has $700 million more in ongoing expenditures than ongoing revenues, continuing the budget gap.

During the 2019-21 biennium, $400 million of oil tax collections is deposited into the state’s general fund. In addition, there are other transfers from funds derived from oil taxes. So essentially, $1.34 billion of the $5.07 billion budget comes from oil tax collections. The point of discussion here is basically how dependent do legislators want the ongoing budget to be on oil tax revenues. The second big question for them to ponder is to what extend to they want legacy fund earnings to be used to help balance the general fund budget. This will be a point of discussion as the Legacy Fund Earnings committee is studying the best uses for the earnings during the interim. The next LFE committee meeting is February 19th and 20th in Watford City.
Click here to view the Legislative Council Presentation

Revenues Tracking Ahead of Forecast
The Office of Management and Budget provided a report to the committee highlighting how revenues are tracking ahead of forecast. The Legacy fund is averaging deposits of $56 million a month and sits at $6.7 billion. Oil revenue is currently $50 million above forecast and Director Joe Morsette says if revenues track at the current rate the state’s ending fund balance (June 2021) could be close to $400 million.

Internet Sales Tax Collections Up
State Tax Commissioner, Ryan Rauschenberger, gave an update on sales tax revenues. In 2018, the U.S. Supreme Court ruled that remote sellers be required to collect North Dakota sales and use tax on their sales in the state. According to the Tax Department, there are 6,288 active remote sellers collecting the tax. Since June 21, 2018 $37 million in sales tax has been collected, with $8.95 million collected at the local level. Another new law, which requires a marketplace seller to collect taxes, is also bringing in additional sales tax dollars to the state and local. $6.57 million has been collected in the first four months. Rauschenberger noted that this is new revenue for the state because of the new law but it essentially replaces revenue lost at the local level at “physical” retailers in the state. Sales taxes as a whole are on pace to exceed the legislative forecast.



Monday, February 3, 2020

Interim Committee Studies Taxing Vaping Products

The Interim Taxation committee discussed taxation of electronic smoking devices and even reviewed a draft of a potential bill to tax liquid nicotine. This is a conversation happening across the country. In
NCSL: State E-Cigarette Tax
early 2020, 21 states and D.C. have enacted vaping taxes according to the National Council of State Legislatures. States have different approaches to taxing these new products by either percentage of price, amount of e-liquid or a combination of the two.

Currently in North Dakota there is no tax on liquid nicotine or e-cigarettes. Traditional tobacco products are taxed at a minimal rate. In fact, the American Lung Association gives North Dakota a F grade for tobacco taxes due to the low tax rate which is the 4th lowest cigarette tax in the country.

The conversation at the interim taxation committee centered around two main ideas. Lawmakers received information regarding usage of e-cigarettes and testimony supporting a tax increase to help reduce usage, especially with youth.

The North Dakota Department of Health (NDDOH) provided testimony regarding vaping-related
illnesses in North Dakota. NDDOH has identified 20 confirmed and probable cases of vaping-related illnesses in 8 counties. Those are cases where the individual was hospitalized. Most of those illnesses are individuals 18-24 years old. In addition, 59 individuals have self-reported illnesses to NDDOH.

Raising the legal age to 21 to purchase tobacco products may help curb usage, but several who testified emphasized how that alone is not enough. The federal law was enacted Dec 20, 2019 which raised the age from 18-21. T21, as it’s called, has been a push by public health officials in several states including North Dakota over the past few years.

Tobacco Free North Dakota (TFND) Executive Director Heather Austin shared data showing how the percentage of high schoolers using cigarettes have decreased over the past 20 years but the percentage of those who are using e-cigarettes has dramatically increased to 27.5%. Austin also encouraged lawmakers to follow CDC practices and rates when exploring setting a tax rate for e-cigarettes.

Robin Lang, with the North Dakota Department of Public Instruction (DPI) also testified. She referred to statistics as reported by the Youth Risk Behavior Survey. This voluntary survey is conducted every other year for students in grades 7-12. Findings for 2019 showed 1/3 of ND high school students who took the survey reported using electronic vapor products which were mostly purchased at the store or online.

The Committee welcomed two students from Jamestown High School who shared their thoughts and concerns regarding the issue. Low prices with no tax raise during their lifetime and easy access to products were reasons the students gave for supporting increased taxation for cigarettes as well as establishing a tax for vaping products.

Sue Kahler, Bismarck-Burleigh Public Health Tobacco Prevention and Control Coordinator added
that the products are made to be concealed making it difficult for teachers to identify. The Fargo Cass Public Health reports an “alarming trend in Cass County regarding tobacco use, including e-cigarettes (vaping devices) and the number of citations given to minors” by School Resource Officers. The number of citations issued has nearly quadrupled in the last five years emphasizing how e-cigs have made an impact. Most recently elementary school students (ages 10-11) were cited.

The interim committee will continue its work to study the feasibility and desirability of applying an alternative or additional tax on liquid nicotine and electronic smoking devices. The committee did not take any action on the bill draft.

NDACo & NDCCA boards approved a resolution supporting the regulation and taxation of liquid nicotine products and electronic smoking devices.

2019‐16. Taxation of liquid nicotine and electronic smoking devices. The target marketing of electronic smoking and vaping devices has created an epidemic among North Dakota’s youth. While electronic smoking devices are defined as a product that may be used to deliver any aerosolized substance containing nicotine, the sale of such products is weakly regulated and is taxed like regular consumer products. State law regulates and taxes tobacco products separately, and at a higher rate, as it is recognized that tobacco use is the state’s number one cause of preventable disease and death, having devasting economic and serious health consequences. In order to treat all forms of nicotine delivery equally while deterring their use, particularly among youth, county officials support equitable regulation and taxation of liquid nicotine products and electronic smoking devices as part of the North Dakota Tobacco Products Tax. This Association further urges the Legislature to place a moratorium on the sale of liquid nicotine and electronic smoking devices until research and proper regulation can ensure the safety of the consumer.

Thursday, January 30, 2020

February 2020 Interim Legislative Hearing Schedule

As you will see by the below schedule the second legacy fund earnings committee meeting has been scheduled. In an effort to collect input from across the state, the committee is holding hearings in various locations. In addition, they have an evening session to provide greater accessibility. The meeting will be held 2/19 (evening) & 2/20 (morning) in Watford City. 

List of Interim Legislative Committee Meetings - February 2020


2/4      Judiciary Committee - Roughrider Room 9-3:30
2/11    Government Finance Committee, Harvest Room 9:30-3:15
2/13    Energy Development & Transmission Committee, Harvest Room 9-4
2/18    Workers' Compensation Review Committee, Harvest Room 9-3
2/19    Higher Education Committee, Wahpeton - Bisek Hall, NDSCS 1-4:30
2/20    Higher Education Committee, Fargo - Alumni Center, NDSU 8-3
2/19    Legacy Fund Earnings Committee, Watford City - Rough Rider Center 6:30-8pm
2/20    Legacy Fund Earnings Committee, Watford City - Rough Rider Center 8:30-11:30am
2/25    Corrections and Rehabilitation Review Committee, Roughrider Room 10-4:30

Follow this link to legislative council calendar where you can click on specific hearings and view agenda when posted. February 2020 Interim Legislative Calendar

Friday, January 17, 2020

NDACo recommends changes for on-site sewage regulation

The interim Commerce Committee met this week to explore ways to improve on-site sewage treatment system regulation and address areas of concern. Dave Glatt, Director of North Dakota Department of Environmental Quality (DEQ) provided testimony. Glatt endorses local public health wishes to have a state-wide uniform code to provide more consistency for installers across district lines. He noted additional elements that need to be determined is the local/state relationship in terms of responsibilities, licensing and training requirements, and enforcement. Presenting comments from the installer perspective, Tom Schimelfenig, ND Onsite Wastewater Recycling Association, noted they are looking for fairness. The statewide uniform code, licensing, equitable representation on the technical advisory board, education requirements, and vendor approval for acceptable products were some of his stated concerns.

Aaron Birst, NDACo distributed a bill draft developed through discussions with DEQ and local public health units. The bill draft could serve as a starting point for the interim committee's consideration.

Lisa Clute, First District Health Administrator, stood in favor of the bill draft shared by NDACo. She
commented that the State needs to take a more active role and supports the State handling the licensure of installers along with a statewide database.

Chairman Louser appreciated the work that had been done by the stakeholders and the cooperation for mutual benefit.

The proposal brought forward by NDACo recommends the following:
  • DEQ will be responsible to license on-site waste installers; local public health districts would no longer issue licenses.
  • DEQ will have a role in providing training
  • Creates a formal technical advisory board made up of licensed installers, plumbing board members, DEQ, public health, etc. The board would set statewide rules.
  • Provides a penalty for violations
  • Local public health districts role of permitting remains
A resolution approved by NDACo and NDCCA members supports this change. The resolution states:
2019‐15. Sewage Treatment Systems. North Dakota Administrative Code outlines standards and requires licensing for the installation of onsite sewage treatment systems, placing responsibility for these standards with the State Board of Plumbing. The plumbing board has limited staff and has sought few changes to the standards since 2000, causing their use and enforcement to vary across the state. This Association supports legislation moving responsibility for statewide minimum standards and installer licensing to a single state agency provided with adequate resources to fulfill the responsibilities. Further this Association supports the development and adoption of updated statewide onsite sewage treatment standards which allow for modification to address local conditions, and for uniform statewide educational requirements. However, this Association believes that responsibility for local licensure and inspections remain with the local public health unit and the fees supporting that activity be retained locally.