Our view: Latest idea for Legacy? Patience
Herald editorial board
Be patient with the Legacy Fund. That's the message from state Rep. Corey Mock, a member of the North Dakota House Appropriations Committee.
Mock, D-Grand Forks, is a proponent of House Concurrent Resolution 3055, which would change how the Legacy Fund is funded and used. HCR 3055—which passed the House—would automatically invest earnings from the Legacy Fund directly back into the fund's principal, thereby generating a higher return in the coming years.
The Legacy Fund sets aside 30 percent of oil and gas tax revenue into a savings account that now sits at about $6 billion. It has been big news lately, since numerous proposals have arisen that would tap into its earnings.
The Herald has been a proponent of using a portion of Legacy Fund earnings to fund university research initiatives. We still back that proposal and ideas similar to it.
The Herald does not, however, believe Legacy Fund dollars should be dedicated for general use that is not forward-thinking. For instance, we are against a plan to use Legacy Fund earnings to reduce the state income tax.
Now comes the intriguing and prudent HCR 3055.
Mock uses a clever graphic with pipes, spigots and taps to illustrate his point.
The Legacy Fund principal is like a well. Eighty-five percent of that well is unusable, with no pipe leading out; however, 15 percent of that principal has a spigot attached, but the spigot can only be turned by a two-thirds vote of the Legislature.
At the top of the well lies a pool that represents the fund's annual earnings, with a pipe leading directly from those earnings and into the state's general fund. There is no spigot on that tap, but instead the funds flow freely. That's where HCR 3055 comes in.
The proposal would put a spigot on that pipe and require a two-thirds vote by the Legislature to use the earnings. Without a two-thirds vote, the earnings will flow automatically back into the Legacy Fund principal. The idea is that the additional dollars will help the fund grow exponentially in the immediate coming years.
The Legislature still would have the ability to determine each biennium how much would be transferred to the general fund and how much would be reinvested back into the principal.
Mock says that if HCR 3055 passes the Senate — and later passes in a statewide vote — and none of the earnings are spent, the Legacy Fund could reach $20 billion in a decade. Without HCR 3055, the $20 billion plateau likely won't be reached for another 20 years.
Even if only half of the earnings are invested back, the Legacy Fund would hit $20 billion around 2032. That's a big difference for North Dakotans.
So patience, he says, should be practiced.
We still believe Legacy Fund dollars should be tapped for projects that will provide statewide impact and span generations. It should not be used for income-tax reduction.
HCR 3055 could reduce the ability to do big projects, but the benefit — huge gains, faster — could be worth it.