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OUR OPINION: North Dakota's Legacy Fund stands apart

The Legacy Fund. The Common Schools Trust Fund. The Budget Stabilization Fund. The Foundation Aid Stabilization Fund. The Water Resources Trust Fund.

These and other state-managed funds set North Dakota apart and will greatly ease the pain of the state's budget shortfall, Gov. Jack Dalrymple says in his interview here.

But one of those funds is not like the others.

As mentioned before in this space, the Legacy Fund is set apart by its very name. It's not a reserve fund; it's not a stabilization fund. It's a legacy fund, set up specifically to serve not only North Dakotans who are alive today but also all North Dakotans to come.

That argues for restraint when 2017 rolls around, and the interest on the Legacy Fund becomes available for spending.

Not abstinence, mind you — but thoughtful and deliberate restraint.

As Dalrymple notes, that'll take a conscious act of executive and legislative will. For "there's nothing in the history of the intent of the Legacy Fund that ever said anything about how you use the interest," the governor says in the intervew.

As evidence, the fact is that while tapping the fund's principal will require a vote of two-thirds of both houses of the Legislature, the fund's interest income (in 2017 and beyond) can be spent via simple majority votes.

Still, we'd argue for restraint. It was fiscal restraint that created the fund in the first place, a move now almost universally acknowledged as sound. And it's fiscal restraint that'll let the fund keep growing — in anticipation of the day when, thanks to the power of compound interest, even restrained spending of the fund's interest will yield gigantic benefits for North Dakota.

For example, the endowment of just a single university — Harvard — now tips the scale at more than $36 billion. The huge sum frees Harvard to spend some $1.5 billion a year from the endowment, or more than a third of the university's entire operating revenue.

If the North Dakota's Legacy Fund ever approached that status, the state could slash taxes without reducing services, thereby fostering even stronger business growth. Or it could join Alaska as a state that sends residents an annual check, also without reducing services.

And these outcomes likely would be permanent, assuming continuing fiscal prudence.

We're not talking about self-denial. We're talking about self-restraint — about treating the Legacy Fund as an endowment, not a piggy bank.

So go ahead, spend part of the interest. But don't spend all or even most. Instead, reinvest the bulk of the earnings, thus helping the fund to grow.

Do that over time, and North Dakota before long will have a Legacy Fund worthy of the name.

— Tom Dennis for the Herald

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