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Resolution promoting Legacy spending control turns into study

The North Dakota Senate gutted on Thursday a resolution aimed at raising the bar for spending Legacy Fund earnings, replacing it with an interim study on Legacy spending.

The resolution’s sponsor, Minot native Rep. Corey Mock, D-Grand Forks, said he will encourage the House not to concur but to send the resolution to conference committee.

North Dakota legislators have stomped on bills designed to spend money from the state’s oil savings account, whether they’ve been for infrastructure projects, income tax reduction or other purposes. House Concurrent Resolution 3055, now a study resolution, remains alive in its weakened condition, while proponents of particular projects look elsewhere for money.

On Wednesday, the Senate passed Republican Majority Leader Rich Wardner’s legislation to use $50 million from the state treasury and loans from the state-owned Bank of North Dakota to fund operating and maintenance costs of the proposed Theodore Roosevelt Library in Medora. Gov. Doug Burgum had proposed putting Legacy Fund interest earnings toward the library’s construction as part of a plan to spend $300 million on legacy projects, but legislators declined to go along with the idea.

Under the rules established by voters in creating the Legacy Fund in 2010, interest earnings have been re-invested with the principal for the first six years. This biennium, earnings will automatically transfer to the general fund. A two-thirds vote of the Legislature is needed to transfer principal to the general fund. No more than 15 percent of the principal can be transferred in a biennium.

Mock introduced HCR 3055 as a constitutional measure requiring voter approval. The original resolution required a two-thirds vote of legislators to transfer earnings from the Legacy Fund to the state general fund.

“It’s a small bill, but it’s a big policy decision,” Mock said. “I would much rather see us create the required positive action every two years by the Legislature to decide how much, if any, of the earnings we need to spend, and have that conversation to initiate the transfer. Then every two years we can debate or discuss how those funds are used.”

Mock said supporters don’t oppose studying how to spend fund earnings but believe that should be a separate resolution.

“We don’t think a study should be done in lieu of amending the constitution,” he said.

Eliminating automatic transfers increases the likelihood that some or all of the earnings will be re-invested, Mock said. Re-investing all earnings over the next 40 years would enable the fund principal to grow to $143 billion, based on projected oil production and fund returns of 5.28%. Taking the earnings out would curb the principal’s growth to $34 billion, according to figures from the Legislative Council. The fund currently holds about $6 billion.

“There is not a single legislator that thinks that we should just use all the earnings on a given year,” Mock said. “Everyone recognizes that we need to be prudent with those dollars.”

Sen. Oley Larsen, R-Minot, said he can support use of Legacy earnings for infrastructure projects or scholarships but believes the state should re-invest some of the money. Larsen, who supported the original language in HCR 3055, voted against it as amended into a study.

“I think it’s a waste of time for government to just continue to be studying these things,” he said. “If it’s a good idea, let’s do the work.”

Sen. David Hogue, R-Minot, said given the differences of opinion over how to use Legacy Fund earnings, a study to identify acceptable and unacceptable uses is worthwhile. He does not support changing how money is transferred to the general fund, calling the HCR 3055 proposal unnecessary.

“The earnings are the ‘renewable’ recurring revenue that we can count on every biennium, so I think it’s OK to use those earnings every two years,” he said. “I don’t think any generation of North Dakotans should be able to tell all generations how the Legacy Fund should be used. So, if the product of this study is some proposal to mandate (the) Legacy Fund for only a specific purpose, I will oppose it.”

Rep. Larry Bellew, R-Minot, said his goal would be to re-invest earnings to build a fund level capable of supporting the replacement of corporate and individual income taxes. To achieve that goal, there’s some merit in requiring a legislative vote to transfer earnings, he said, but he’s reluctant to propose changing a measure approved by voters. Nor does he believe a study is warranted. He’d rather see the amended Senate version killed in the House, he said.

Sen. Dwight Cook, R-Mandan, chairman of the Senate committee that forwarded the study amendment, said he is satisfied with the mechanisms voters approved when they created the Legacy Fund.

“We have to be sensitive to the voters. The voters created this Legacy Fund. The voters need to be involved in this study with their ideas,” he said.

Meanwhile, the first automatic deposit of Legacy Fund earnings will occur June 30. The 2017 Legislature spent $200 million of the earnings to balance the 2017-19 budget, committing the money before actually getting the deposits.

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