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Legacy Fund proposal spends earnings on roads

Roads take priority in oil fund proposal

Jill Schramm/MDN Sen. Majority Leader Rich Wardner speaks regarding the state’s Legacy Fund at the Western Dakota Energy Association annual meeting Thursday in Minot.

Roads and bridges across the state would benefit from a plan being promoted by Senate Majority Leader Rich Wardner, R-Dickinson, for spending earnings from North Dakota’s oil savings account.

Wardner spoke Thursday to the Western Dakota Energy Association in Minot about legislative interim discussions regarding future spending of interest income from the Legacy Fund.

Wardner, who promoted the Prairie Dog bill that established hub city and infrastructure funding this biennium, is favoring a plan for the Legacy Fund that he says is driven by a desire for lower taxes, increased quality of life and less reliance on the federal government.

“We’re starting early. We’re hoping that by the time we get to next year at this time, we’ve got a plan that everybody can get behind,” he said.

Top on the list of priorities are roads and revolving loan funds for cities and counties and for water infrastructure.

The plan would place 25% of earnings from the Legacy Fund into the state highway trust fund. That amounts to about $92 million in the 2021-23 biennium, based on estimates and assumptions.

The plan is based on conservative assumptions that are below current actuals. It assumes $645 million annually from 30% of oil tax revenue will be deposited in the fund, earning a 5% return, of which 1% would go back into the fund. The fund is expected to grow from $6.1 million in 2019 to $15 billion in 2031.

During the 2021-23 biennium, the Legacy Fund is projected to produce $368 million in spendable earnings, which jumps to $639 million in the 2023-25 biennium. The 2021-23 biennium figure is low in comparison because the Legislature pre-spent or allocated to the Common Schools Trust Fund a portion of earnings.

The projected $92 million for highways next biennium would give the state $56 million. Counties would receive $20 million, cities $11.5 million, townships $2.5 million and transit $1.4 million.

“If we don’t do this, this means we will have to raise the fuel tax. And even if you raise the fuel tax 10 cents a gallon, it’s not going to compare to this over time,” Wardner said, explaining a 1-cent fuel tax increase generates only $15 million a biennium.

Over time, the amount available from Legacy earnings for highways increases. By the 2031-33 biennium, it is estimated, there will be $172.7 million for the state, $62 million for counties, $35.2 million for cities, $7.6 million for townships and $4.2 million for transit.

Wardner said the amounts aren’t excessive given the needs across the state, but the money will allow the transportation entities to address their priorities.

Low-interest revolving loan funds for cities and counties and for water infrastructure also rank high for consideration. The state has a loan fund for counties and cities that contains $175 million, but all the money is committed, Wardner said.

“If we can put some more money in this, then cities will be able to go out there and take care of some of these things that need to be done now and save money in the future,” he said.

A loan fund for water projects would benefit Minot’s flood protection, he added.

Minot city officials advocated unsuccessfully for a loan fund using Legacy earnings or principal in the past legislative session. The city continues to list a loan fund from which it could borrow for flood protection construction as one of its legislative priorities. Should a loan fund be put in place, the city projects a potential savings over 20 to 40 years of $100 million in sales taxes that otherwise would go to flood protection costs.

The Legacy Fund plan presented by Wardner also listed other spending proposals under consideration, including support for schools to reduce local property taxes and assist with building and expansion projects. Additional proposals include funding for career and technical education centers, behavioral health services in schools and in community-based settings, university research, state and local parks, housing incentives and Legacy projects supported by the Legislature.

Wardner noted different ideas also are being offered, such as using earnings to eliminate the state income tax or property taxes. Another idea has been to save most of the earnings.

Wardner said he doesn’t support putting the majority of earnings back into the Legacy Fund.

“That isn’t going to fly. We have needs that need to be taken care of if we’re going to move this state forward and recruit the workforce that we need,” he said. With the Legacy Fund, he said, “I think we have a bright future to take care of a lot of needs in the state of North Dakota.”

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