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
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| 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.
