BISMARCK-As North Dakota legislators wrestle with the impacts of our state's budget shortfall, they're looking to a range of state and constitutional funds to help fill the gap.

Specifically, lawmakers are contemplating using the earnings, and potentially a portion of the principal, from the state's $4 billion Legacy Fund. But new analysis by the Great Plains Institute underscores the implications of the difficult choices legislators face.

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Our estimates suggest that the future value of the Legacy Fund already has been reduced by more than 50 percent due to lower projections for oil price and production as well as to changes in state policy, notably a 2015 reduction in the state's oil extraction tax.

The diminished future potential of the fund is built in - before any further decisions affecting the fund that legislators might make in the final days of this session.

In 2010, North Dakotans passed a constitutional measure requiring the deposit of 30 percent of the state's oil and gas tax revenue into a Legacy Fund. For the first time this year, investment earnings from the fund - forecast to be $120 million this biennium - become available for legislators to spend or reinvest for the future.

The Legislature also has authority to spend up to 15 percent from the fund's principal each biennium, if two-thirds of each chamber agrees.

In 2013, Great Plains Institute brought together a diverse group of North Dakota public, private, community and nonprofit leaders to make recommendations regarding the governance of the Legacy Fund. In developing their recommendations, these North Dakotans prepared projections of the fund's growth under different long-term management scenarios, ranging from spending all fund earnings to reinvesting all earnings between now and 2060.

The group ultimately chose a preferred scenario-"Reinvest, Replace and Spend"-to inform their recommendations. Under this scenario, the Legislature would spend 25 percent of annual earnings from 2017-39 and reinvest the remaining 75 percent back into the Legacy Fund until oil production peaks and starts falling.

At that point, the Legislature would use a portion of the remaining 75 percent of earnings to replace diminishing state oil and gas revenue, while reinvesting the rest into the fund.

Much has changed since 2014. Oil prices have fallen sharply, and production has leveled off, reducing state tax revenue and deposits into the Legacy Fund from an average of more than $90 million a month in 2014 to $30 million in 2016.

Given the changes in projected oil prices and production and in state tax policy, Great Plains Institute recalculated its original analysis from 2014 to reflect current state law and new long-term state and federal projections.

The results are dramatic: the end balance of the Legacy Fund in 2060 falls 53 to 63 percent across all management scenarios, as compared to the 2014 analysis.

The Legacy Fund Initiative's preferred scenario drops from a robust inflation-adjusted balance of $98 billion in our 2014 calculations to $50 billion in the current projection.

Furthermore, the Legislature's 2015 decision to lower the oil extraction tax from 6.5 to 5 percent reduces the end value of the fund by nearly 20 percent from the 2014 projections.

Recently, some have noted that eliminating the low-oil-price trigger in 2015 has generated additional oil tax revenue. But that argument focuses only on the near-term, not the long-term revenue effects of tax rates.

The official projections used in this analysis show oil prices quickly exceeding the state's original trigger threshold and staying above that line. Our analysis models scenarios to the year 2060; and across those decades, the projections show, the tax cut likely will hurt revenue more than the trigger's elimination will help it.

Most important, the projections made both in 2014 and today show the extraordinary power of compounding interest over time, and the fact that prudent management by the Legislature today has the potential to double or triple the Legacy Fund's balance down the road.

For example, in Great Plains Institute's updated projections, the end balance of the "Reinvest All Earnings" scenario exceeds the "Spend All Earnings" scenario fivefold. That's an $80 billion difference in 2060.

North Dakota's Legacy Fund stands at a critical juncture. Our legislators' decisions this session will set precedents that could determine the fund's eventual size and the capacity of this public endowment to serve-in the vision of Legacy Fund Initiative participants-as "a permanent, sustainable resource for future generations that fosters self-sufficiency, creates opportunity and enhances quality of life for all citizens."

Crabtree is vice president for fossil energy and Lahlum is a program consultant at the Great Plains Institute.