North Dakota: What Does “Permanent Oil Tax Trust Fund” Mean To You?

I don’t think that it’s an hard concept but some in Bismarck apparently do.
Back in 1980 there was an initiated measure to raise the oil severance tax. An important part of that measure was the idea to set up a permanent oil trust fund that would accumulate some of the tax revenues to always provide a revenue stream for education in good years and bad. Oil as we all know is a cyclical industry. Add to that sooner or later the revenues are going to decline because we’re out of petroleum in the state or we’ve switched to something more economical. The idea to set up a trust fund resonated with the voters and the measure passed fairly easily as I recall.
So how is our Permanent Oil Tax Trust Fund doing?
I’ve got a couple scans from the 2005–2007 and 2007–2009 budget. I’ll start with the 2005–2007 report.

It’s a little tough to make out but you can read the original here (page 16). This includes the actual results of the 2003 thru 2005 biennium. You’ll see that it began with a balance of nearly thirteen million dollars and ended with nearly forty eight million dollars. Twelve million was transfered out to the general fund. After over twenty years of this fund I would have expected a much larger beginning balance so apparently it’s been a standing practice of the legislature to raid our trust fund.
The 2005-2007 approved budget planned to take all of that increase out and spend it for the Governor’s Centers of Excellence programs and the general fund. However as we see in the scan below the fund did quite a bit better than expected: (Original here)

You’ll see that the revenues were quite a bit higher so the fund wound up with a balance of $135 million. They also took another $5.3 million out of our trust fund for Governor Hoeven’s Centers of Excellence.
Now for the current budget they’re planning on taking out $145 million including $15 for the Centers of Excellence (again), $8 million in grants to tribal colleges, and $6.5 million for the Veterans Home facility. In addition to some smaller programs they transfered $115 million to the general fund. Which leads to this quote I saw in the Dickinson paper.

She also cautioned lawmakers not to think of the $200 million Budget Stabilization Fund and Oil Tax Trust Fund’s $143 million as “surplus” because they are not available for spending, other than for a new property tax rebate program that starts next year.

So it looks like the Governor’s tax relief program is coming out of our Permanent Trust fund. They could find $468 million dollars more to increase general fund to spending but they had to raid our savings account, our trust fund to come up with their too little and poorly structured tax relief plan.
I admit that I get overly worked up over some of these budget issues and I apologize for the times I’ve been unnecessarily rude in the way I’ve written about them. But this really gets me angry. We’re supposed to have this money for the time when the oil revenues dry up. Instead Bismarck is spending for the moment and not looking to the future.
In the last three budgets, Governor Hoeven and the legislature has raided our trust funds $238 million dollars. Thirty-six million dollars have been for those less than satisfactory Center’s for Excellence along. How much would there be in our trust fund if Bsimarck would just leave it alone? I imagine they structured it this way so they can blame the tax relief for the missing money rather than blame the over spending that’s been going on.
There is a solution. Proposed Constitutional Amendment #1 will be on the ballot next November. It will require a 3/4ths vote of the state legislature for transferring money out of our trust fund. The framers of the 1980 measure put in a provision for the state to use the money in an emergency which was smart. However I don’t think they envisioned it being used as a piggy bank for the politicians. I’ll put the text of the proposed amendment in the extended entry.
I’ve said it before that this last legislative session was the worst one in history. This is just more proof.
Thanks to Dustin at AFP for helping out with some background on this post.