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Legislators take mixed view of governor’s budget

Minot lawmakers to give scrutiny to bonding, spending proposals

The governor’s plan to use earnings from North Dakota’s oil tax trust fund to support bonding for infrastructure projects is getting a mixed response from Minot’s Republican legislative delegation. While some say it makes financial sense to use the Legacy Fund to capitalize on current low interest rates, others are cautious about borrowing, particularly with trust fund dollars.

The bonding plan is one of the components of a $15 billion proposed budget released by Gov. Doug Burgum Thursday.

The plan includes a $700 million revolving loan fund for political subdivisions, created through state borrowing. A percent of earnings from the Legacy Fund would pay off the original loan, while the revolving loan fund created with that original loan would continue permanently. The selling points for borrowing now are the extremely low interest rates and the ability to avoid inflationary costs associated with delaying projects until cash is in hand.

Burgum said an existing revolving loan fund through the Bank of North Dakota is limited in addressing the needs of political subdivisions because of loan caps and other restrictions. The additional loan fund could provide money, for instance, to augment State Water Commission funds for Minot flood control.

The $700,000 loan fund is part of the governor’s $1.25 billion in proposed borrowing. The borrowing includes $323 million for infrastructure, such as a $30 million project to improve safety on U.S. Highway 52 from Minot to Carrington by adding passing lanes, known as a “super two-lane” concept. Included in $182 million in borrowing for state-owned facilities is $19 million for deferred maintenance on higher education campuses.

Sen. Randy Burckhard said the governor’s bonding plan has merit.

“We’ve got some major projects in this state. We’ve got transportation needs. We have major water projects,” he said. “Those are legacy-type projects because they last for years. If you were to pay for them with bonded debt, you could save tens of millions, even hundreds of millions, over 30 years, so I think the bonding idea will get backing.”

Rep. Larry Bellew said he is not a fan of borrowing but will keep an open mind to bonding proposals. However, he doesn’t want to use Legacy funds to bond. He prefers Legacy earnings be used to reduce income tax or reform property taxes.

Overall, Minot legislators are still assessing the details of the governor’s budget.

“I think he was a little generous with areas and not so generous in other areas,” Bellew said. “The overall budget, I think, is probably higher than it should be spending-wise, and it’s something we’re going to have to scrutinize when we get into the session.”

However, Bellew likes the budget plans for shoring up the employees pension fund and maintaining aid to K-12 schools.

“I wish we could have increased that some, and that’s what we’ll have to look at, too, during the session,” he said of education funding.

Rep. Scott Louser said he was hoping to hear a commitment to funding for Minot-area flood control but did not see an earmark in the budget.

“So I have already started working with a couple of my colleagues to ensure that commitment is going to be fulfilled,” he said.

Louser said he was pleased with the governor’s call for no tax increase and with the proposal to use Legacy Fund earnings to support bonding.

“The infrastructure bonding idea is very intriguing to me, with interest rates as low as they are,” he said.

“I thought it was a very fair budget,” Sen. Karen Krebsbach said. “The bonding package I love.”

She said the Senate also will consider an infrastructure bonding package being prepared by Senate Majority Leader Rich Wardner, R-Dickinson, but she likes the concept of using Legacy Fund earnings to pay off bonds.

Krebsbach has more concern about the governor’s proposed changes to Medicaid Expansion that cut provider reimbursements at a time when they are struggling with a pandemic. She also has reservations about the 7.5% cut the governor suggests in the higher education funding formula. Schools already are seeing less money as students impacted by the pandemic aren’t able to complete credit hours, which is a factor in funding formula, she said.

“The idea of taking another 7.5% from it is not healthy for higher ed,” Krebsbach said. “If we can even minimize it, it will help.”

Burgum explained the 7.5% reduction is applied to just the state funding portion of campus revenues. For instance, Minot State University would see a reduction in total revenues from all sources of about 2%. Burgum said the university might regain formula dollars and offset that loss through expansion of credit hours and recruitment efforts that result in enrollment increases.

“There is upside in there,” Burgum said. “This formula incentivizes universities to do more of what they’re good at, which is reach students where they are, because it’s not just about reaching people that are 18 to 22. It’s about reaching adults. It’s about teaching classes and master classes to retirees that want to get more education. There’s the online opportunity. You can be offering classes to people that aren’t even in our region or in our state through online. So there’s lots of ways where universities can drive more revenue.”

The governor also proposed additional funding for career and technical education projects.

“We put $45 million in, and if there’s more demand than that, I think it would be smart if the Legislature could find a way to move even more dollars because they’ve got such a strong track record,” Burgum said.

The money would be provided as one-to-one grants to match local commitments. Minot’s proposed CTE project could apply, but legislators will have to determine the types of local funds that could be considered for the match.

“We just want to take state dollars and leverage them,” Burgum said. “All the companies that are interested in workforce, this is a really easy way for them to step up and make in-kind donations as well.”

Bonding for infrastructure and workforce training are among concepts in the budget supported by Rep. Jay Fisher.

“We need to continue to build and replace long-term infrastructure like NAWS and flood control, invest in career and technical education for our children and grandchildren to ensure a talented workforce, and invest in research and innovation. The long-term return on investment will be amazing for our great state. Leveraging part of our Legacy Fund at 1 to 1-1/2 percent when inflation is 2 to 3 percent is a sound business decision to address our immediate needs and build our future. I am anxious to go to work in January to help tweak the governor’s initial budget,” he said.

“I thought it was a very reasonable proposal,” Sen. David Hogue said of the budget. “I’m generally supportive of the bonding.” With interest rates at unusual lows, he said, “There is a window of opportunity, and people in the private sector as well are realizing that. So, I think, when you can borrow money at that rate, we should do it.”

Rep. Bob Paulson said the governor provided valuable input to the budgeting process.

“I appreciated the fact that he recommended not increasing the general fund spending, acknowledging the difficult fiscal scenario that we face. I also liked the focus on efficiency, proposing that state employee pay raises be performance based and allowing additional raises if efficiencies can be found within the agency,” he said. “I’m concerned that when you combine the governor’s bonding proposal with Sen. Wardner’s, it would double our state’s bonding commitment in one biennium. Hopefully there is overlap and efficiency that can be found between the two, if we do go forward with bonding.”

Rep. Jeff Hoverson said the government needs to experience financial cuts and feel the burden of the pandemic the way citizens and businesses are feeling it. He said he would prefer a tax holiday or using Legacy Fund dollars to give back to taxpayers over creating more ways to spend money on government.

“That would stimulate the economy. It would help shrink the government,” he said.

“I’m torn on the bonding,” Rep. Dan Ruby said. “It does make sense, to some extent, to do that and to do more, and then have the cost of doing that spread out over a longer period of time and a future tax base of people.”

On the other hand, he said, it straps future legislatures with ongoing debt.

“It’s something I’ll be considering, and certainly, if it looks like it could be a savings over time and get some things done that we may not have gotten done if we tried to just do it all in cash, then I may be willing to consider some of that,” he said.

In general, though, Ruby voiced concern about revenues being available to support the governor’s budget.

“So I think it’s going to be determined a lot by what kind of revenue forecasts we’re going to see throughout the session,” he said, “then just see if what he is requesting is even feasible.”

Burckhard selected Senate president pro tem

Sen. Randy Burckhard, R-Minot, will serve as president pro tem during the upcoming 2021 legislative session.

As president pro tem, Burckhard will preside over the Senate in absence of the lieutenant governor and will be involved in various leadership activities.

“I’m very honored,” Burckhard said of the selection that occurred during the legislative organizational session this past week. A District 5 senator since 2011, Burckhard is a retired communications executive with SRT.

He served on the Legislative Management committee during the interim and has been active in the Minot community. He is a past member of the Minot City Council, a past president of the convention and visitors bureau and Minot State University Alumni Association and past chairman of the Minot Area Chamber of Commerce, Minot Area Development Corporation and Souris Valley United Way. He also has been engaged in organizations to support the military and MSU.

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