BISMARCK, N.D. • North Dakota has some $7 billion in its Legacy Fund, but most of it is invested almost entirely outside of the state.
Jon Godfread, insurance commissioner for North Dakota and one of three elected officials on the State Investment Board, said he believes the Peace Garden State would be better served if some of that money were invested in commercial business projects here at home.
It’s a plan that is years in the making.
Investing money from the Legacy Fund in projects at home has been discussed for a while, but Godfread said it is time to stop discussing and start doing. Such investments would not only help diversify and strengthen the state economy, especially after the toll of the pandemic, but it would better serve those who voted for the Legacy Fund a decade ago.
Godfread’s proposal: “I'd like to see it at 20% – 10% for fixed income investments in the state and 10% for equity investments in the state,” he said.
Investments may be with startups or technology companies, as well as infrastructure projects, but also other types of businesses, large and small.
“I think it could be any North Dakota business,” he said.
Among other things, it would allow a business owner in one area of the state who wishes to open a location in another part of the state to do so through a capital infusion – a cross-subsidization of the same company in which management may infuse a division with capital if it believes the venture will become profitable.
“It could be large businesses all the way down to the venture startup on the entrepreneurial side,” Godfread said.
In 2010 North Dakota voters approved the Legacy Fund, which sets aside a portion of oil and gas taxes. The constitutional language does not specify uses of the fund, according to information from the state’s Insurance Department, but the principal of the fund is invested by the SIB and the Legislature can spend the earnings and principal.
Godfread’s proposal does not focus on the investments of the Legacy Fund and does not change or adjust the Legacy Fund earnings, which currently go to the state’s general fund for allocation from the Legislature.
Gov. Doug Burgum, with a broader sweep of its investments, spoke of the Legacy Fund during his budget address in December, proposing five areas of focus going forward, and saying investments “should be one time projects that don't grow government, and most importantly they should create a positive impact for our economy and our workforce in our communities. That's the lens.”
Godfread said the Legislature may step in to guide the discussions, and that the Legacy Fund would continue to grow at the same rate it does with investments elsewhere.
He said Burgum and Lt. Gov. Brent Sanford are both “softly supportive” of his proposal.
“They want to see the idea come together and see what it looks like,” Godfread said. “Their main concern is that we don't want the State Investment Board doing direct investing, which I get, because I don't want it to be a shark tank, where you've got every project in the world coming to the State Investment Board.” If that were to happen, then SIB members would be “trying to make decisions on whether this pasta plant makes sense or whether this idea makes sense. We don't have the expertise to do that, but engaging the fund managers that we have in the state, and being able to leverage their expertise of our local economy, makes a lot of sense.”
Godfread said the SIB would hire fund managers to take the burden from its members.
“It's not like the State Investment Board would be making direct investments into these companies; it would be target firms in North Dakota that do this,” he said. “I think there's a way to structure that 10% portfolio, which we would turn over to the fund managers to look at and how that makes sense, because, that again, is their expertise. But I think it could really be for any size business that is looking for a capital infusion.”