Legacy Fund

The state Senate has passed a measure to study investing Legacy Fund moneys in North Dakota.

A bill already making its way through the Legislature will set aside a percentage of future earnings to be invested locally. But Sen. Mark Weber (R-Casselton) told the Senate this measure is intended to take a broader view, to see if there are opportunities where Legacy Fund monies could be directly invested into start-up companies.

The North Dakota House has passed a bill outlining what is to be done with Legacy Fund earnings.

The House Appropriations Committee combined ideas from other bills into one vehicle going forward in the Legislative session. It creates a “sinking and interest” fund to meet the debt service for bonding. It also spells out that earnings will go into the state’s Strategic Investment and Improvements fund, the Clean Sustainable Energy Fund, to the Infrastructure Revolving Loan Fund, and some other Legislative purposes.

The House Finance and Taxation Committee is looking at a bill requiring the state Investment Board to invest 20 percent of the Legacy Fund into the state of North Dakota.

The bill’s sponsor – Rep. Mike Nathe (R-Bismarck) – said half of that would go into fixed income products, and the other 10 percent would be invested in equity, helping businesses raise capital.

A group of legislators has introduced a measure to designate 20 percent of the Legacy Fund’s principle to make investments in North Dakota companies.

It directs the state Investment Board to make those investments.

"This is a bill a lot of us believe in," said the bill's chief sponsor, Rep. Mike Nathe (R-Bismarck) at a Capitol news conference. "It is something the public has been calling for, to use the Legacy Fund wisely."

Nathe said anytime you can invest in North Dakota, you invest in ourselves.

Republican lawmakers have unveiled a $1.1 billion bonding bill, that uses profits from the state’s Legacy Fund to pay off the bonds.

The bill is aimed at funding infrastructure projects.

Gov. Doug Burgum has proposed a $1.25 billion bonding package. The difference between Burgum’s proposal and this one is the Legislative package does not contain a proposed $700 million revolving loan fund for local political subdivisions. The lawmakers’ bill offers those funds as grants.

North Dakota's Senate Majority Leader is working on a proposal for what he’s calling a “Gap Bonding Program” for infrastructure projects.

"The cost of servicing bonds right now is very low," said Sen. Rich Wardner (R-Dickinson). "It's around 1.7 percent. And it's going to stay that way for another 2 to 3 years, before it starts to rise."

Wardner said he has a list of these projects – which includes things like Minot flood control, the FM Diversion project and the Red River Valley Water Supply project.

North Dakota's Chief Investment Officer said the Legacy fund lost value during the market downturn in March and April.

But David Hunter said it has recovered, and is now close to where it was before that downturn.

Hunter told the Legacy and Budget Stabilization Fund Advisory Board the Legacy fund peaked in mid-February at just over $7 billion.

"Given the strong capital market and economic conditions at the time, including over $1 billion in net investment income in 2019, the fund did well," Hunter said.

The Chancellor of the North Dakota University System is proposing that a portion of the proceeds of the state’s Legacy Fund be used to create a “Higher Education Innovation Fund.”

Mark Hagerott said the economy is changing, and North Dakota’s colleges need to change with it.

Gov. Doug Burgum’s call for 50 percent of the proceeds of the state’s Legacy Fund to be reinvested back into the fund is sparking a lot of discussion among state Legislators.

"There will be no question that we will be reinvesting some of the Legacy earnings," said Sen. Majority Leader Rich Wardner (R-Dickinson). "But what that percent will be, I don't know."

Wardner said other lawmakers have suggested as high as a 75 percent reinvestment.

"I've been scratching around, and penciling," Wardner said. "I'm kind of around the 40 percent mark."

Gov. Doug Burgum wants to reinvest half the proceeds from the state’s Legacy Fund back into the fund.

Burgum would use half for targeted needs, such as infrastructure and technology investments. But during his “State of the State” address, Burgum said the Legacy Fund is designed to help when the oil and gas run dry.

"If you reinvest half of it, then we set ourselves on a path where, in a short 13 years, we would have built up $26 billion," Burgum said. "I call that a good start."

Burgum said Norway's Sovereign Wealth Fund is $1 trillion.