Revenue shortfall to put pressure on oil tax trust fund
BISMARCK -- As news of North Dakota's $1 billion revenue shortfall and 4.05 percent budget cuts for state agencies sank in Monday, some elected officials predicted the appetite for tapping into the state's $3.5 billion trust fund for oil taxes wi...
BISMARCK -- As news of North Dakota’s $1 billion revenue shortfall and 4.05 percent budget cuts for state agencies sank in Monday, some elected officials predicted the appetite for tapping into the state’s $3.5 billion trust fund for oil taxes will grow when lawmakers convene next January.
Some majority Republican lawmakers have adamantly opposed spending the Legacy Fund’s principal or earnings as a way to weather the downturn in state revenues caused by depressed market prices for crude oil and agricultural commodities.
But Senate Majority Leader Rich Wardner, R-Dickinson, said Monday he supports using the fund’s earnings while protecting the principal.
“They will be available, and that’s what I think will help us in formulating this budget and (taking) care of our priorities,” he said, adding, “I think the downturn in the revenue has definitely changed that conversation.”
Voters in 2010 approved a constitutional amendment proposed by the Legislature to create the Legacy Fund. It receives 30 percent of state taxes on oil and gas production and extraction.
The law requires that interest and investment earnings accruing after June 30, 2017, be transferred to the state’s general fund, so they will be available to the 2017 Legislature. But it remains a point of debate whether the Legacy Fund’s realized earnings – about $185 million as of Nov. 30, according to state Retirement and Investment Office Executive Director David Hunter – should be available.
Either way, Democratic House Minority Leader Kenton Onstad of Parshall said the earnings will be on the table when the next revenue forecasts come out in July and November.
“I think we have to use it, or at least look at it,” he said, predicting there won’t be an appetite to touch the principal.
When oil prices were more than $100 a barrel in summer 2014, the state was flush with cash and a budget surplus of more than $2 billion.
But the 2015 Legislature spent $1.1 billion in “surge” funding from the Strategic Investment and Improvements Fund for statewide infrastructure projects, and that fund is now projected to end the 2015-17 biennium with $200 million. Dalrymple also will use all but $75 million of the $572 million Budget Stabilization Fund to help cover the revenue shortfall, and K-12 schools will draw $72 million from the $670 million Foundation Aid Stabilization Fund to cover its share of the cuts. That will leave an overall surplus of about $875 million in the three funds combined.
State agencies will receive budget proposal guidelines for the 2015-17 biennium in April. Asked about the possibility of using Legacy Fund earnings, Gov. Jack Dalrymple said, “It appears that we’ll be looking at all available sources of revenue for the upcoming biennium.”
“We will not have as many ready sources of cash as we have had in the past,” he said.
Lawmakers passed a bill last session requiring Legacy Fund earnings to be invested back into the principal, but Dalrymple vetoed it.