A look at the Legislative Leadership for 2021

 

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Counties to Receive an Additional $25 Million in CARES Funds

ND Lawmakers Approve A Total of $50 Million in CARES Funding to Counties
Funding assists counties in reducing property taxes

North Dakota’s legislative Budget Section today approved $25 million in Coronavirus Aid, Relief, and Economic Security (CARES) funds to counties, which is in addition to the $25 million approved in August. These funds will provide a second round of funding to local government for a total of ten months of law enforcement payroll reimbursement. Public safety payroll is considered an allowable expense to distribute CARES fund dollars. The law enforcement payroll reimbursement is purely the mechanism to deliver funds to local government; counties can use the funds as needed.

The North Dakota Association of Counties (NDACo) recently collected 2021 budget information that reveals that CARES funds have assisted North Dakota counties in delivering tax reductions. This illustrates that counties have acted prudently with property taxes in their use of the CARES funds received.

County commissions were struggling with how to budget for CY21 due to declining revenues and increasing responsibilities, both driven largely by the pandemic fight. The State Emergency Commission and Budget Section stepped in and allocated federal Coronavirus Relief Funds, and the results were noticed.

The initial allocation in August of $25 million for counties came at a perfect time to be incorporated into the process of revising preliminary budgets before final budget approval. At a time when many counties anticipated raising property taxes, and some raising them significantly, we have seen the opposite. Twenty-four counties lowered their property tax (mill) rate, and seven of those were more than double-digit percentage reductions. Even more surprisingly, fourteen counties were able to lower their total dollars of taxes collected. In addition, eleven counties were able to lower BOTH their mill rate and tax dollars collected.

NDACo Executive Director Terry Traynor said “The state/county partnership was evident in the understanding the Governor’s Office and the Legislature have for the interconnection of state aid and property taxes. This funding has been significant for counties, and more importantly, property taxpayers. Although some counties were unable to lower taxes due to local staffing and operational responsibilities, across the state taxpayers avoided significant increases to their county taxes during this time of economic challenge.” 

“We are incredibly grateful for the allocation of CARES Funds to Morton County. We recently approved our 2021 budget and were able to reduce our mill levy by 8.1% and the dollars we collect in property tax by 3.4%,” commented Morton County Chair Cody Schulz. “We were only able to do this because of conservative, needs-based funding and the peace of mind that the CARES funding would leave us with a reasonable cash reserve to deal with future emergencies.”

Ward County acted similarly, citing the use of CARES funds to lower mills for the 2021 budget and placing funds in reserve to manage budget shortfalls going forward. “With CARES funds we were able to lower our mills an additional 4.19 from what was approved in our preliminary budget, bringing our overall levy back to the same as what it was for 2020’s budget,” said Ward County Auditor Marisa Haman.

As counties are on the front lines of the coronavirus pandemic response, counties are experiencing unanticipated financial burdens. Public health employees have been directly involved in COVID-19 testing and contact tracing. Counties have seen dramatic COVID-19 impacts affecting elections. Jails and law enforcement, along with counties, have made investments in their facilities to provide safer environments to work and do business.

As all governments across North Dakota, Cass County has been impacted by the COVID emergency in various ways. Cass County Finance Director Mike Montplaisir highlights some of the impacts and costs associated. As with any workplace, cleaning efforts were enhanced, and workspaces were created to provide distance between employees and customers. In some of their newly remodeled offices that included adding glass to the counter area to create barriers and glass on the top of workstations to create barriers between employees. In other departments it meant moving employees to working from home. The remote work situations also come with associated IT costs. “Our big challenge this year was elections, first an all-mail primary election and then right now an election run partly by mail and partly by vote centers. In Cass County we opened six vote centers. Just the plexiglass to protect the workers was $9,000—not to mention the additional poll-worker time to staff the vote centers. The other big cost for Cass County was $70,000 for mailing ballots in the general election. Altogether, Cass County’s out-of-pocket, COVID-related costs have totaled over $350,000 of additional, unbudgeted expenditures.”

The Cass County Jail has been forced to house some prisoners in other counties to provide more segregation between prisoners. Cass County is making investments to provide for better handling of infectious diseases in the future. Critical are larger booking areas so that people from different law enforcement agencies and their prisoners are property separated as prisoners are brought in; more isolation cells that have negative air flows to prevent disease spread; and simply more capacity to handle more prisoners with diseases, so both prisoners and staff are kept safe.

“While addressing all these COVID impacts, Cass County was not only able to hold the line in taxes, we were able to reduce our mill levy by 2.23 mills or a little over $2 million dollars,” said Montplaisir. “We are very committed to reduce taxes where we can, while still providing necessary services to the public. The CARES Act funding has been a welcome relief as we struggle with some increased costs as we deal with COVID and try to reinvent how we can provide services in a changing world”.

Thanks to the Budget Section’s approval, counties will receive a total of $50 million in CARES funds and cities will receive a total of $70 million for law enforcement payroll reimbursement. Providing these funds to local governments will benefit property taxpayers across the state. North Dakota received $1.25 billion from the CARES Act.

Follow this link to see a county breakdown of the estimated $50 million for law enforcement payroll reimbursement: http://bit.ly/CARESestimate

Governor Holds Call with Commissioners & Mayors to Discuss COVID-19

Local public health officials, county commissioners and city mayors met with Governor Burgum and Lt. Governor Sanford to discuss what work is currently being done to address COVID-19. Represented areas were those with the highest number of current, active COVID cases. The local leaders have been working together within their communities since March and relayed strategies which have been implemented and modified as situations evolve.

Throughout the discussion it was clear that local collaboration has been instrumental during the pandemic response. The ND National Guard was praised for their valuable assistance in testing events. In addition to increased access both in times and locations, most localities are ramping up media campaigns in conjunction with the State’s #maskupND push. It was noted that tribal communities have a mask mandate in place which is well observed. Wearing face coverings in addition to physical distancing while in public are two of the easiest preventive measures to slow the spread.

Recurring challenges across the state continue to be consistent messaging, public compliance, and staffing. Locals reiterated previous requests for consistent messaging at all levels not only to contribute to mitigation strategies but also to alleviate public confusion of expectations. Health officials noted that people are much less cooperative with contact tracers and following quarantine and isolation guidelines. Staffing and onboarding temporary hires to handle the extra work created by the pandemic such as contact tracing and testing continues to be a huge concern.

Community protocols vary across the state depending on the case situations. Spikes or clusters in positive cases are seen in congregate settings and large gatherings. Some mayors and commissioners have taken bold leadership steps by placing a moratorium on large events and asking businesses to limit capacity. These short-term decisive actions are expected to help keep businesses open for the long haul.

Local leader asks:
· Governor explain risk-level restriction guidelines when referring to “colors”
· Discourage mass gatherings – biggest push back yet seems to spread most quickly at mass events
· Personal responsibility – be part of the solution, not the problem
· Quarantine and isolation orders need to come from state and message support local communities
· Hospital data needed
· Counties already established in-person voting location/protocols, would like to keep those open

Interim Taxation Committee Discusses Need for Fuel Tax Increase

The Interim Taxation Committee spent the bulk of their discussion on transportation funding and how an increase in the state’s fuel tax would support necessary investments to improve roads and bridges long-term.

North Dakota’s motor fuel tax is .23 cents/gallon. It’s been at that level since 2005. Vehicle Registration fees have not increased since 2005 as well. In fact, North Dakota’s fuel tax is one of the lowest in the nation. Fuel taxes are distributed into the Highway Distribution fund, which is distributed to the state, counties, cities, townships for road construction. Director of North Dakota Department of Transportation, Bill Panos, indicated that the traditional funding sources simply do not meet the transportation needs in the state. Panos identified that $2.18 billion should be invested in the next ten years in order to maintain the current road and bridge system.
A 1 cent increase would equal $7.4 million in additional Highway Distribution Fund dollars, of which 22% goes to county roads. Committee Chairman, Representative Jason Dockter, expressed support in the development of a bill to increase the fuel tax for the next Legislative Session. However, no motion was made for an interim committee bill to be drafted.
$3.5 billion in one-time transportation legislative funding has been provided since 2007. Representative Vicki Steiner questioned how North Dakota is not further ahead when the state has appropriated billions of dollars in one-time funds in recent years. Director Panos recognized the legislature’s substantial support for North Dakota’s road system, with much of the funding dedicated to investments in western North Dakota. Panos indicated that those roads were at the same time incurring excessive damage from heavy trucks and high traffic volumes. He told lawmakers North Dakota roads will rapidly deteriorate if additional investments are not made. He highlighted how bridges are even a greater issue; indicating how North Dakota is #47 in the United States for bridge quality.

Check out the links to presentations provided to the interim committee:

ND DOT Presentation: https://www.legis.nd.gov/files/committees/662019/21_5175_02000_1100presentation.pdf

UGPTI – Tim Horner Infrastructure Needs: ND County, Township & Tribal Roads
https://www.legis.nd.gov/files/committees/66-2019/21_5175_02000_1120presentation.pdf

Legislative Committees Working Wrap Up Interim Studies

The North Dakota Interim Legislative Committees have a busy schedule in September. These committees are looking to wrap up the studies they have been assigned. Follow up from the studies typically includes drafting of bills and approval of bills to submit for the 2021 Legislature's consideration. The COVID-19 pandemic has greatly impacted the interim process by delaying meetings. The biggest change for the interim has been the addition of video streaming. This allows lawmakers to attend online as well as the public to also view the meeting remotely.  

You can view the calendar of scheduled meetings for the month of September below. Visit https://www.legis.nd.gov/events to see each meeting, agenda along with information to allow you to view the live stream of the meeting. 

Counties to Receive $25 million in CARES Funding for COVID-19 Costs and Impacts

North Dakota lawmakers approved sending $25.4 million in COVID-19 relief funds to North Dakota counties. The North Dakota Legislative Budget Section made the final approval August 13th as part of a package that is the third tranche of federal funding to support the state’s COVID-19 response and recovery efforts. Cities and counties will receive $59 million, on top of the $20 million for public health units.

“This is very important for county government which has experienced the double impact of increased costs related to coronavirus response and decreasing revenues caused by the related economic downturn,” said North Dakota Association of Counties Executive Director Terry Traynor. 

Counties are on the front lines of the coronavirus pandemic response. During this unprecedented public health emergency, counties are committed to mitigate COVID-19 and its impacts on citizens. Public health employees have been directly involved in COVID-19 testing and contact tracing, but counties have also seen dramatic COVID-19 impacts affecting elections, jails and law enforcement along with the investments in making county facilities safe environments to work and do business. 

“As local governments experience declining revenues during the COVID-19 pandemic, this substantial support will help cities and counties limit property tax increases by delivering the relief to them before their 2021 budgets are finalized,” said Governor Doug Burgum. “We’re grateful for the partnership of our legislative leaders and local political subdivisions in developing this consistent approach.”

The $59 million will be paid out as a reimbursement for law enforcement payroll based on each jurisdiction’s number of law enforcement officers and actual payroll costs from March through September. Public safety payroll is considered an allowable expense to distribution of Coronavirus Relief Fund dollars.

NDACo, working with the ND League of Cities (NDLC) and state leaders, reached this agreement as the mechanism to get much-needed funds to local governments for COVID-19 impacts. These funds will be immediately available to the city and county general funds for calendar year 2020 costs, or to address calendar year 2021 budget issues.

Office of Management and Budget (OMB) Director Joe Morrissette explained to lawmakers how these funds will be a welcome form of tax relief to jurisdictions struggling with the loss of revenue.

“These funds will provide meaningful support for local government at a time when they are building their budgets around a declining revenue from the state through the state aid allocations and highway tax distribution fund allocations, as well as significant reductions in their local revenues in sales tax and hotel and lodging taxes,” explained Morrissette.

Traynor says it is clear there is an expectation these funds will be used in a way that will benefit property taxpayers and keep property tax mill rates as low as possible.

NDACo and NDLC have been working with OMB on the documentation needed from cities and counties to certify the expenditures to each city and county. Morrissette expects that the payments to cities and counties should be made in a matter of weeks.

“The simple, straightforward mechanism to deliver this fiscal relief to local taxpayers is the result of North Dakota’s exceptional state and local partnership. County officials thank Governor Burgum, his staff and our legislative leadership for making this possible,” said Traynor.

North Dakota received $1.25 billion from the Coronavirus Relief Fund as part of the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act. The $319.7 million approved in August is what remained of the state’s Coronavirus Relief Fund dollars.

Governor Proposes Release of CARES Funds to Counties & Cities

Consistent with U.S. Treasury CARES Act guidance, the Governor is taking a proposal to the Emergency Commission this coming Monday to reimburse counties and cities for “law enforcement first responder payroll costs” for the first 7 months of the pandemic (March - Sept.).  If approved by the EC and the Budget Section, counties will simply submit their total payroll costs for sworn officers for March through July – for immediate reimbursement.  August and September payroll amounts will be submitted and reimbursed later, once they are incurred.

This concept will get much needed revenue (~$59 million) to counties and cities quickly and efficiently.  This will constitute the jurisdiction’s entire allocation, and any previously reimbursed amounts will be deducted from the total payroll costs.  County estimates based on averages are included in the attached presentation, however reimbursements will be based on actual payroll costs (salary and benefits) paid.   The proposal was announced today at the Auditor’s Conference. Your county auditor will be bringing more specific information back from that presentation.  We will also follow up with OMB instructions once formal approval is achieved. You can view the presentation with the proposal here: https://drive.google.com/file/d/1AdwaiyjeaQ5azJsI2ONgNVQlf7Z4-nw9/view?usp=sharing

"This is the result of a concerted effort by NDACo and the ND League of Cities, and tremendous support from OMB, the Governor’s Office and Legislative Leadership. We are extremely grateful to them for their understanding and dedicated effort on behalf of local government," said NDACo Executive Director Terry Traynor. "I personally would also like to thank all of our county auditors, their payroll and HR staff, and those law enforcement leaders that have helped provide the data necessary to make this case."

Counties Provide Frontline Services During Pandemic

Federal funding critical to assist counties in providing public health and emergency response during COVID-19 
North Dakota county employees are on the front lines of the response to the coronavirus pandemic. The services of county public health, corrections, human services, law enforcement, elections and general government have all been impacted and most of those impacts have a significant fiscal component.

CARES Act Reimbursement to Counties County officials are pleased that the Governor’s Office, through OMB and DES, is providing an avenue for these costs to be addressed by the Emergency Commission and Budget Section. County emergency managers and county auditors are working feverishly to get all costs incurred from March 1st through May 31st submitted into the FEMA grants system as well as the newly created OMB-Cares Act portal, in anticipation of the mid-June Emergency Commission meeting. County costs include staff overtime, PPE, sanitization of jails and other facilities, telework facilitation, secure ballot boxes and so much more.

Some costs associated with specific state agencies are being handled through state requests – notably public health support by Department of Health, human service overtime by Department of Human Services, and the holding of state prisoners in county jails by Department of Corrections and Rehabilitation. Reimbursing these unforeseen costs is so critical at a time when each county, like the state, is already experiencing revenue reductions due to the pandemic. Long-term, the reductions in State Aid Distribution, Highway Distribution, and Gross Production Tax (GPT) revenues will be devastating to the county services on which our citizens rely.

Below is an overview of some of the pressing county issues and activities related to COVID-19.
Local Public Health Staff Play Key Role in Community Testing and Contact Tracing During this unprecedented public health emergency, our local public health units have been working in cooperation with the state to mitigate COVID-19. Local public health staff play a vital role in contact tracing in the state as well as coordinate and assist with mass COVID-19 testing events. They are working with local leaders and businesses to meet the Governor’s Smart Restart guidelines by providing recommended guidance to those in their communities. Like many others, local health units have had to purchase additional equipment. Due to the concentration on conducting testing events and contact tracing, local public health is seeing additional costs for overtime, while foregoing much of their usual fee revenue from services they have been forced to suspend.

State Inmates Overcrowding County Jails

The North Dakota Department of Corrections and Rehabilitation suspended admissions of inmates on March 13th, which led to local facilities holding state-sentenced inmates who would normally be transferred to DOCR. Since this closure, local jail facilities have housed 134 state-sentenced inmates. The state has approved CARES funding for DOCR to reimburse counties for their cost to hold these inmates, which totals approximately $590,000. But the real issue is how the DOCR closure of admissions has put a strain on the operations of our local facilities and made it difficult for them to have the space necessary to segregate inmates. The COVID-19 threat is even greater for our jails as they continue to have new arrests brought into the facility. Counties have taken actions to reduce population to allow for isolation of new inmates and have changed their policies and procedures to ensure the safety of officers and inmates. NDACo has worked with jail administrators in holding meetings with DOCR on this issue to urge the reopening of admissions. DOCR has scheduled to transfer some of the inmates starting the first week in June. NDACo is currently working with jail administrators, local public health administrators and state partners in scheduling COVID testing at all local jail facilities.

Vote by Mail Only for June Election

To best protect voters and election workers, the June election will be Vote by Mail only. At the request of the North Dakota County Auditors Association, Governor Doug Burgum issued Executive Order 2020-13 on March 26th, which allows counties to authorize Vote by Mail only. This order suspended the requirement for counties to have at least one physical polling location. Counties in all 53 counties adopted Vote by Mail as the only method to conduct the June election. NDACo has worked closely with auditors on an outreach plan. We encourage you to check out NDACo’s Facebook page and share the election materials. The key message is to get voters to return their ballots. As of May 29th, only 40% of the 178,000 ballots sent to voters have been returned.

Courthouse Access The important work of our counties continued during the pandemic. However, every county restricted public access to the courthouse. Many implemented by-appointment-only entry, with individuals entering being screened. In response to CDC recommendations, counties also used alternative methods for their commission meetings, such as conference calls and/or web-based applications. Several counties have decided to continue with restricting access through the June 9th election to best protect county employees focused on the election work. We expect our counties to be reevaluating their access during their June meetings.

Budget Section Approves Additional CARES funds for ND and Provides General Fund Update

The North Dakota Legislature's Budget Section today approved sending out more than $500 million in federal funds to state agencies; which a portion of those funds will go to county government in a few specific areas.
"It should be noted that, although counties didn’t get our direct reimbursement request addressed, three very important county costs were approved, said NDACo Executive Director Terry Traynor. Those items are:

• DOH received $20 million for public health district estimated costs through December 30, 2020
• DOCR received $880,202 to reimburse county jails for expenses incurred housing DOCR sentenced inmates through July 2020
• DHS received $285,000 for human service zone direct expenses estimated through mid-September.

View the Budget Section agenda which includes a summary and links to the specific requests.

View the Legislative Council presentation on the Coronavirus Relief Fund - North Dakota State Plan

The Budget Section will meet again in June 25, to look at additional distributions of the federal funds. 

Joe Morrissette, Director of North Dakota Office of Management and Budget also provided an update on the status of the state budget. General Fund reviews for the month of April are $40 million short of the Legislative forecast. However, because revenues have tracked ahead of forecast prior to the COVID-19 pandemic, revenues overall are still ahead of forecast by $81 million. The ending fund balance of the state's general fund is expected to be $126 million June 2021. 

Budget Section Approves CARES Act Funding

It was an unusual sight in the Senate Chambers this week. The Budget Section met virtually with legislative members joining via phone and only a handful of state agency representatives physically being in the chamber. 

The meeting needed to be held to get the Legislature's approval for state agencies to accept federal funding. This is in response to the $2.2 trillion CARES Act federal economic rescue package, to respond to the coronavirus pandemic. North Dakota will be receiving $133.5 million to support rural transportation, K-12 education, child care, Medicaid and other assistance to provide services to North Dakota citizens. The Budget Section approved the following transactions: 

• Department of Transportation - $18 million
• Federal Transit Administration to support the Formula Grants for Rural Areas Program. 
• ND would receive a 280% increase in these funds through the CARES Act. 
• Program is one of the major funding sources that enable North Dakota rural communities to maintain a viable network of public transportation between those communities and larger communities which is essential for rural residents to get access to health services and shopping.  
• There is no state or local match required.
• Department of Public Instruction - $36.6 million
• Grants to assist school districts in providing services and continue educating students during the COVID-19 pandemic. 
• Funds will be distributed to school districts in proportion to what they receive in Title 1 funds.
• Department of Human Services - $42.7 million
• Grants to support increases to Medicaid FMAP, LIHEAP, Child Care Existing programs including grants for medical assistance including Medicaid and home and community based services. 
• DHS reports they are experiencing an increase in requests for Medicaid assistance with the COVID-19 pandemic.
• Nutritional services (Senior Centers & Meals on Wheels)
• Department of Human Services - $36 million
• Childcare Emergency Operation Grant to childcare providers as a result of the COVID-19 pandemic.  
• State Library - $200,000 

In addition, Office of Management and Budget Director Joe Morrissette, provided limited information related to revenues and the budget. "We are continually monitoring this fluid situation with the drop in oil prices and the evolving situation; that none of us have been through before with business closures," said Morrissette. He told lawmakers that it is difficult to summarize the impacts at this point as there is very little data collected and the duration of the pandemic is unknown. 

"We are working with Moody’s Analytics to use their best estimates and incorporate their estimates into models for North Dakota." Morrissette explained how the data from sales tax collections that will illustrate the impacts of business closures won't be collected until the end of April.  Morrissette also said the move to shift the income tax deadline to July 15th shouldn't have a negative impact on the state's budget. 

You can view the meeting video here: http://video.legis.nd.gov/en/PowerBrowser/PowerBrowserV2/20200409/-1/15203

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

'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

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.

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.

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.

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

https://www.legis.nd.gov/events/2020-02

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.