BISMARCK — Two proposals to redesign the way North Dakota spends and invests its massive oil tax savings account are one step closer to the law books after the state's House of Representatives overwhelmingly approved the legislation on Wednesday, Feb. 24.
The bills, which would pave the way for income tax relief and big capital investment in local firms, will now head to the Senate for consideration. Lawmakers also killed on Wednesday a competing Democratic proposal for spending banked oil tax revenue.
A decade after North Dakotans voted to establish the Legacy Fund, the account is worth more than $8.1 billion. Lawmakers have used the fund's earnings to balance the state's budget in recent years, but leaders from both parties say they want to show residents this legislative session that the fund is being put toward quality-of-life improvements.
On the spending side of the ledger, House Bill 1380 would design a complex blueprint for doling out the fund's earnings from 2023 onward. Dickinson Republican Rep. Mike Lefor's proposal, which earned 71 up-votes in the lower chamber, would establish an algorithm that sets aside 6% of the five-year average balance of the Legacy Fund as a baseline for spending earnings each budget cycle.
Under the algorithm:
- The first $100 million in incoming earnings would be put toward repaying investors for infrastructure bonds. The House approved a $680 million bonding package last week, though the proposal still needs the Senate's blessing.
- The next $40 million would go toward a "clean sustainable" energy fund.
- The next $40 million would be toward loans to cities, townships and counties for infrastructure projects. Remaining funds earmarked through the algorithm could be allocated at the Legislature's discretion.
Any additional Legacy Fund earnings not spent through the algorithm would be divvied up as follows:
- 40% to an infrastructure fund that has been previously tapped to balance the budget.
- 20% toward income tax relief for North Dakota residents and companies.
- 40% goes back into the principal of the Legacy Fund.
Senate Majority Leader Rich Wardner, R-Dickinson, is a co-sponsor on the bill, but the higher chamber could make changes to the legislation before voting on it. The proposal has already undergone one facelift in the House since it was introduced.
A separate bill endorsed by the House with an 85-8 vote on Wednesday aims to invest more of the Legacy Fund in North Dakota companies and infrastructure projects.
Bismarck Republican Rep. Mike Nathe's House Bill 1425 would set a target to designate 4% of the new tax revenue flowing into the Legacy Fund for creating low-interest infrastructure loans of up to $40 million to North Dakota cities, townships and counties. About 6% of the new revenue would go toward low-interest loans available to local businesses through the Bank of North Dakota.
Another 10% of incoming revenue would be tapped for investments in stocks and other equity in North Dakota-based companies.
As it stands now, only about 1% of the Legacy Fund is invested in North Dakota. Nathe said his plan would provide much-needed capital to localities for major infrastructure projects, while promoting up-and-coming businesses in the state.
The proposal has broad support among Senate Republican leaders, including Wardner, who is a bill co-sponsor.