BISMARCK - North Dakota leaders are signaling a growing willingness to use earnings from the state's $3.8 billion Legacy Fund to shore up declining revenues when they craft the budget for next biennium, but just which earnings will be available is still up in the air.
"I'll tell you right now, I'm counting on the revenue from the Legacy Fund," Senate Majority Leader Rich Wardner, R-Dickinson, said during a lively panel discussion Thursday as part of the Greater North Dakota Chamber's daylong Policy Summit in Bismarck.
The discussion came about three weeks after the Legislature met in special session to plug a $310 million budget shortfall for the current biennium that ends next June, in part by using $100 million in profits from the state-owned Bank of North Dakota.
The Legacy Fund has grown to more than $3.8 billion since state voters passed a constitutional amendment in 2010 to create the trust fund by setting 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 lawmakers can't tap it until after June 30, 2017. After that date, the state treasurer must transfer earnings to the state's general fund.
Wardner and House Minority Leader Kenton Onstad, D-Parshall, both said there's no appetite to spend the fund's principal - which requires two-thirds approval in both the House and Senate - but agreed that the earnings will likely be needed to fund state programs.
Wardner said about $120 million in earnings are expected to be available for the 2017-19 biennium, citing a Legislative Council estimate.
"If we're going to keep our priorities and make sure we get through this time, we're going to need that $120 million," he said. "In my mind, I'm planning on that we're probably going to use it."
Brad Crabtree, vice president for fossil energy for the Minneapolis-based Great Plains Institute, led an initiative in 2013-14 involving public and private sector leaders from across the state to develop a road map for the Legacy Fund. He urged lawmakers Thursday not to use the Legacy Fund just to plug short-term budget gaps but to invest most of the earnings back into the principal to allow compounding interest to build the fund bigger so it can be invested in major long-term initiatives later on.
Crabtree said the group presented lawmakers last year with modest recommendations about governance and management of the fund, "and to be very candid, most of the legislators in the hearing room couldn't give a damn."
"I don't see a lot of responsiveness or vision to new ideas, and so it worries me that we're going to make some bad choices that will then set the precedent ... that the Legacy Fund slowly dies a death by a thousand cuts legislative session by legislative session," he said.
"That's an unfair statement," Wardner shot back. "The Legislature is not going to let it die. We're committed to leaving it in there. Sometimes we need to use it, the interest, in order to get through a tough time."
However, the question remains whether the earnings that have accrued so far will also be available for lawmakers to spend with a simple majority vote, or whether they'll be considered part of the principal and will require a two-thirds vote to spend. State Treasurer Kelly Schmidt has asked Attorney General Wayne Stenehjem for an opinion on the issue.
"The constitution is silent on it," she said.
Warner and Onstad both said they're not interested in using those earnings. Onstad said after the panel that he doesn't even want to use the 2017-19 earnings, "but I think we're going to be forced to because we've cut revenue in other areas."
Like other state revenues, monthly deposits into the Legacy Fund have shrunk considerably as low crude prices have slowed oil drilling activity, though a rebound is in the forecast.
The average monthly deposit so far this calendar year has been $29.7 million, down from about $50 million in 2015 and $93 million in 2014, according to the treasurer's office. The record high monthly deposit was more than $117 million in August 2014. This month's deposit was about $35.3 million.
The 2016 figures reflect GOP lawmakers' decision last year to lower the oil extraction rate from 6.5 percent to 5 percent as of Jan. 1, while doing away with price-based tax breaks that would have drastically reduced oil tax collections. Whether the tax break was necessary continues to be a source of debate, as seen Thursday.
Revenue forecasts released earlier this month project tax revenues going into the Legacy Fund will total about $810.7 million this biennium and $994.2 million in 2017-19.
Gov. Jack Dalrymple told reporters last month that he would not rule out the possibility of using interest earnings from the Legacy Fund in his proposed budget for 2017-19, but said he doesn't support spending the principal.