North Dakota House OKs in-state Legacy Fund investment bill
BISMARCK, N.D. (AP) — The North Dakota House on Wednesday overwhelmingly endorsed bipartisan legislation aimed at creating a broader investment policy for the state’s voter-approved oil tax savings account.
Representatives voted 85-8 to approve the bill that would tap 20% of future oil tax collections coming into the Legacy Fund to help establish loans for expensive infrastructure projects and provide capital for in-state companies.
No one in the Republican-led House spoke in opposition to the bill. It now goes to the GOP-controlled Senate, where it also has strong support, including from Sen. Rich Wardner, the chamber’s majority leader and a bill co-sponsor.
The bill’s primary sponsor, Republican Rep. Mike Nathe of Bismarck, said only about 1% of the Legacy Fund’s principal is invested in North Dakota at present. He said the bill will “provide great opportunities, growth and help diversify” the state’s economy.
“This bill sends a powerful message ... that we believe in ourselves,” he said.
Voters in 2010 endorsed a constitutional amendment that requires setting aside 30% of state tax revenues on oil and natural gas production in the Legacy Fund, which is valued at about $8 billion. It’s expected to earn about $500 million over the next two-year budget cycle.
Under the proposed legislation, earnings from investments would be used to establish a revolving loan fund. Loans from the fund would have an interest rate of less than 2%. They would be administered by the state-owned Bank of North Dakota for projects such as flood protection and water systems. Cities, counties and other political subdivisions would be eligible for loans.
The maximum loan amount would be $40 million and could not exceed a 30-year term. The legislation would exclude most routine maintenance and infrastructure repair projects.
A decade ago, revenue from the fund was parked mostly in short-term, low-risk and low-return U.S bonds that were guaranteed by government agencies. But annual earnings from the fund barely kept pace with inflation.
The State Investment Board now invests the Legacy Fund money internationally in a broad range of assets, including stocks, bonds and real estate. The legislation requires the board to give preference to North Dakota companies and financial institutions to administer the in-state investments.
Earnings must at least equal other investments from the Legacy Fund, which have a five-year average of about 5.5%.