BISMARCK, N.D. (AP) — State officials and business leaders voiced strong support for a bill Tuesday that would create a broader investment policy for North Dakota’s voter-approved oil tax savings account.
The bipartisan legislation 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.
GOP Rep. Mike Nathe, the bill’s sponsor, has said less than 2% of the Legacy Fund’s principal is currently invested in North Dakota.
Insurance Commissioner Jon Godfread and others said that if passed the bill would diversify the state’s economy and establish a broader tax base by “developing and advancing North Dakota.”
“This is North Dakota’s money,” Godfread told the House Finance and Taxation Committee. “These are the people’s dollars.”
Officials from the state-owned Bank of North Dakota and the North Dakota Commerce Department, chambers of commerce representatives and others spoke in favor of the legislation.
No one at the hearing spoke in opposition.
Republican Rep. Craig Headland, the committee chairman, said the bill would almost certainly get a “do-pass” recommendation and will be forwarded to the full House this week for consideration.
In 2010, North Dakota voters 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 now valued at about $8 billion. It’s expected to earn about $500 million in the next two-year budget cycle.
The most recent deposit into the fund was about $30 million in December.
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.
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, averaging a return of about 6%.