State oil royalties will create opportunity

Oil royalties from North Dakota school lands represent part of the state’s property tax solution — and more.

North Dakota has been aggressive in making mineral leases on school lands available for drilling, to the point that two-thirds of those lands in the Oil Patch have been, or soon will be, drilled. Royalties from the producing wells on school lands go into a trust, from which the interest helps fund public education in the state.

That trust will provide about $138 million for elementary and secondary education in the two-year state budget beginning in 2013. Roughly, that will represent 15 percent of state money spent on education (not including higher education) in the next biennium.

As royalties continue to grow, so will the trust’s fund balance as well is its investment and interest income. A recent Associated Press story indicated the state is getting $20 million a month from oil royalties, about three-quarters of which go to the education trust.

If the percentage of education funding from the trust continues to grow, it could take pressure off other taxes, in particular property tax. In the past several state budgets, funding for primary and secondary education was the primary vehicle for providing property tax relief.

The state’s budget is more complicated than a straight line between revenues from oil royalties to school funding and tax relief. But the strong financial condition of state government, in general, largely due to increased oil production, will give the governor and lawmakers flexibility and opportunity to do big things in the 2013 Legislature — those big things that should benefit North Dakotans across the state.

Income from the school trust has rapidly become a major and long-term tool for working on state education funding.

The revenue from the trust was $64.6 million in the 2003-05 biennium and it has more than doubled to $138 million for 2013-15. Lance Gaebe, state land commissioner, expects revenues from the trust to increase to $200.9 million for 2015-17 and to grow to $408.7 million by 2021-23. The assumptions for this trend are a 6 percent per year return on investment and $220 million a year in new money.

That’s huge.

North Dakota Gov. Jack Dalrymple will soon make his budget address during the organizational session of the state Legislature. It’s going to be a budget statement like none that have come before, just based on the dollar figures. But the state’s strong financial position will give the governor and lawmakers the opportunity to do some big things, to address nagging problems like tax restructuring and relief, and to help shape the state’s future for its citizens.

Tags: opinion, energy, government, editorials