OUR OPINION: Approach Legacy Fund with restraint
North Dakota's in good company. Even Norway is feeling the pinch of low oil prices and is making withdrawals from its sovereign wealth fund. In North Dakota, as Forum News Service reported last week, state leaders "are signaling a growing willing...
North Dakota's in good company.
Even Norway is feeling the pinch of low oil prices and is making withdrawals from its sovereign wealth fund. In North Dakota, as Forum News Service reported last week, state leaders "are signaling a growing willingness to use earnings from the state's Legacy Fund to shore up declining revenues."
But there still are big differences between the two situations, and they point out how North Dakota can and should learn from Norway's example.
Specifically, they show why North Dakota should be miserly with its fund, taking as little as possible from the earnings while vowing to keep focusing on letting the fund grow. If lawmakers can emerge from the 2017 legislative session with those goals intact, they will have done a gigantic favor for generations to come.
The first difference between the funds, of course, is their sheer size. North Dakota's Legacy Fund totals about $3.8 billion. Norway's sovereign wealth fund tips the scale at nearly a trillion dollars-some $890 billion, to be exact.
A fund of that size promises to help Norway in dramatic ways for centuries to come. And, of course, Norway's fund didn't get to be so big by accident. It grew because Norway let it grow: The country scrupulously avoided raiding the fund for short-term purposes, deferring almost everything for long-term gain.
Here's another way in which that nationwide commitment shows up: Yes, Norway now is making withdrawals from the fund-but those withdrawals are the first in the 20 years since the fund was set up.
Every other year, the Norway fund's earnings have more than covered any spending, a fact that has allowed the fund-like a well-managed college endowment-to grow and grow and grow.
True, North Dakota isn't thinking about dipping into the Legacy Fund's principal, which in any event would require two-thirds votes of the state House and Senate. But the earnings will be available for General Fund purposes next year.
Which makes the question-as the Forum News Service story put it-"Which earnings?"
Will the earnings that already have accrued also be available, in addition to the expected $120 million that the fund will earn during the 2017-19 biennium?
Here's our vote: Lawmakers should make do with as little as possible from the North Dakota Legacy Fund. This is the period in the fund's history when the state will set spending habits. Will those habits be ones of convenience?
Or will they be habits of prudence, frugality and long-term vision?
Remember, it's called the Legacy Fund for a reason. The reason is that North Dakotans want this legacy to build, and the fund over many decades to grow.
Norway showed the way. The country set the pattern early of its sovereign-wealth fund spending, and that pattern is one of deliberate restraint.
That's the approach North Dakota should take, too.
-- Tom Dennis for the Herald