LEGISLATURE APPROVES PROPOSED CONSTITUTIONAL AMENDMENT ESTABLISHING PERMANENT OIL TAX TRUST FUND

The North Dakota Legislature has taken the first step in establishing a Permanent Oil Tax Trust Fund. Any oil and gas tax revenue above $100 million each biennium will be saved in the fund. As a proposed Constitutional Amendment, the measure will go to a vote of the people in November 2008.

“Because of the price of oil, North Dakota’s oil tax revenues have increased greatly,” Senate Majority Leader Bob Stenehjem (R-Bismarck) said. “Now is a perfect time to put some away.”

The initial $100 million generated by oil and gas production will be deposited in the general fund. Any revenue above $100 million will remain in the Permanent Oil Tax Trust Fund. If the Amendment existed today, $58.5 million would remain in savings on June 30, 2007, the end of the current biennium. With the amendment, the projected savings next biennium is $67 million. The fund would then operate similarly to the Common Schools Trust Fund, which generates approximately $70 million for the state each biennium.

“If the voters approve this Amendment, we will assure the bulk of revenues from oil and gas are here for our children and our children’s children,” said Rep. Dave Weiler (R-Bismarck), the resolution’s prime sponsor. “These are not renewable resources, so we need to make sure the people of North Dakota reap the full benefits of oil and gas extraction while they’re available.”

Under the Amendment, the $100 million threshold will be adjusted for inflation every two years. The principal will remain in the fund and continue to grow, unless three-fourths of both houses approve an expenditure of not more than 20 percent in any biennium. The interest from the account will be transferred to the general fund each biennium as well.

“With these changes, the fund will operate similarly to the Alaska Permanent Fund,” co-sponsor Rep. Bob Skarphol (R-Tioga) said. Established in 1976 when Alaska’s oil boom was just beginning, that fund also saves a share of oil revenues. The Alaska fund has grown to billions of dollars, which sustain much of Alaska’s state government spending and provide enough revenue that some of the proceeds are distributed as checks to Alaska residents each year.

“This proposal leaves a legacy of fiscal responsibility for North Dakota’s young people,” House Majority Leader Rick Berg (R-Fargo) said. “There is a lot of potential in our oil and gas reserves which, if we save some of the profits, could provide stability in years to come.”

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