Our view: Wise uses of Legacy top 2021 session
Three sound plans moved forward this year.
North Dakota’s Legacy Fund – a savings account derived from taxes on oil production in the state – has surpassed $8 billion. What to do with the growing fund has been among the top questions for state lawmakers over the past several sessions of the Legislature.
At the end of the 2021 session, lawmakers’ decisions on the Legacy Fund should be considered among their top successes this biennium.
Three sound plans moved forward this year, including:
● A plan to invest part of the Legacy Fund earnings in local companies and infrastructure. Officially named House Bill 1425, the plan creates a framework for the State Investment Board to designate up to 10% of tax collections flowing into the Legacy Fund for creating loans tailored to North Dakota cities, counties and businesses. Another allocation of up to 10% would be earmarked to invest in stocks and other equity in North Dakota-based companies.
It comes after North Dakota Insurance Commission Jon Godfread, who serves on the state’s investment board, put his support behind the idea, even before the start of the session.
● A plan that will boost infrastructure projects throughout the state. When Gov. Doug Burgum signed HB 1431, he said it will touch all of North Dakota, not only through its targeted projects but also by freeing up dollars for projects in smaller communities. He also said putting dollars into bond projects is timely because of low interest rates.
The most expensive will be the Fargo flood diversion project ($435 million). It’s good to fund flood mitigation projects, since it’s difficult to convince outside companies to invest in a state that consistently sees massive damage due to flooding.
Also, HB 1431 will send funds to highway projects and infrastructure loans to cities and counties. Communities may argue it isn’t enough, but it’s still a good investment in North Dakota.
● A plan to create a blueprint for spending Legacy Fund earnings going forward.
According to a Forum News Service report last week, the idea behind HB 1380 is built on an algorithm that sets aside 7% of the five-year average balance of the Legacy Fund as a baseline for spending earnings during each two-year budget cycle.
Like so many North Dakotans, we too have offered our 2 cents on spending Legacy Fund dollars, but are resolute that its intent is twofold: It should be a source of income when the oil industry goes away, which it inevitably shall, and its dollars should only be used to diversify the state’s economy. It should never go directly to the people, but rather to public projects that benefit the people.
For example, no Legacy dollars should be used for tax relief. But rebuilding infrastructure and helping diversify the economy benefits all.
Also important: The Legacy Fund’s earnings – not the principal – only should be used for one-time projects rather than lasting commitments.
Meanwhile, people don’t want the Legacy Fund to just continue to grow. It’s time to invest some of it while still building the balance.
The Legislature did that during the 2021 session, again staving off impulsive ideas and instead wisely dedicating Legacy Fund dollars for the best possible use, while benefiting us all.