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Funding growth is a source of contention for North Dakota legislators

Funding growth is a source of contention for North Dakota legislators

 

Constitutional changes are needed if North Dakota is to release its storehouse of savings to benefit schools and oil-impacted areas, Minot legislators said Friday.

Several legislators attended a Minot Area Chamber of Commerce Government Affairs Committee meeting Friday, where Sen. David Hogue and Rep. Dan Ruby, both R-Minot, spoke. Legislators are studying the impact of oil development and examining ways to improve the state’s tax structure.

Taxpayers concerned about property taxes and communities facing pressures from oil development have questioned why the state is socking away billions of dollars in trust funds rather than releasing the money to ease taxes and deal with development burdens.

“What’s frustrating is a lot of it is tied up in constitutional funds that we can’t appropriate,” Hogue said.

Last session, he co-sponsored a bill that would have asked voters to release more than $1 billion in a Foundation Aid Stabilization Fund. The fund was created by voters in 1994 after budget shortfalls in the late 1980s and early 1990s. The fund is to be used in event of a shortfall in foundation aid funding for schools.

“It’s become close to an obsolete fund,” Hogue said. “In order to access it you have to change the constitution, and that takes a vote of the people.”

Hogue said disagreement over where to re-direct the money killed his bill. There was insistence from some western legislators that the money go to alleviate general impacts on oil communities rather than remain with schools, he said.

The Foundation Aid Stabilization Fund is fed by oil and gas taxes. So is the Common Schools Trust Fund, which some communities, including Minot, would like to tap for school construction projects.

Ruby said the Attorney General’s office may be weighing in on the issue of whether money from the Common Schools Trust Fund can be spent to help growing schools. The initial conclusion is that it cannot, he said. It may take a constitutional amendment to access money in the trust fund, expected to grow to $4 billion by 2015.

Ruby said legislators have looked at whether the trust fund could be used to back school bond issues as a form of investment of those funds. However, previous efforts to help small communities using state funds and a similar bonding strategy encountered too many obstacles, he said.

Another fund taking in oil and gas revenues is the Legacy Fund, created by voters in 2010. The fund is accumulating $100 million a month and is expected to contain $2 billion by the 2015 session, legislators said.

The money cannot be touched by the Legislature until 2017, when the principal and earnings can be spent with a two-thirds vote of each house. No more than 15 percent of the principal can be spent during a biennium.

Hogue said the Legacy Fund is growing based on production of 800,000 barrels of oil a day, which is projected to grow to a million barrels a day.

Money even has flowed into state coffers despite tax cuts, Ruby said.

“In the last three sessions, legislators lowered income taxes. In the last six years, the revenue from income taxes has gone up,” he said.

He said the committee is looking at further reduction of the income tax. A proposal to eliminate taxes on houses but leave other property taxes in place doesn’t appear to be feasible under a constitutional requirement that taxation be equitable, he said.

Sen. Karen Krebsbach, R-N.D., noted the biggest tax-generated revenue source in the state is sales tax. That tax also is driven by oil development, as indicated by sales tax collections in Williston, which now are the highest of any city in the state.

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