North Dakota’s Universities Need Spending Reform Not a Bailout

In a letter to the Grand Forks Herald today University of North Dakota professor Thomasine Heitkamp (sister to U.S. Senator Heidi Heitkamp) argues that the state ought to tap into its Legacy Fund amid revenue shortfalls to fund the state’s universities.

“The Legacy Fund was created for just the sort of fiscal crisis we face now,” she argues.

There is a pile of money in that fund. According to the State Treasurer’s Office, the balance in the fund as of last month was nearly $3.8 billion (it gets revenue from 30 percent of the state’s tax collections on oil and gas production/extraction). Lawmakers are free now to spend the interest accrued by the fund’s principle balance, and with a 2/3’s majority vote can even withdraw up to 15 percent of the principal.

But would it be good policy to use Legacy Fund dollars to fund higher education? Heitkamp casts the issue as saving jobs and services for our state, but in reality I’m afraid that such a use of those reserve funds would only postpone much needed fiscal reforms on our state’s campuses.

Unfortunately, much like the rest of the state’s budget, the university system saw explosive spending growth during the years when the Bakken oil boom was pushing a tidal wave of tax revenues into state coffers. Even accounting for a roughly 8 percent decrease in the current biennium, the universities have seen over the last decade an average of 16.8 percent increase in general fund appropriations every biennium for the last decade.

In the 2013-2015 biennium alone the universities saw a 38.4 percent increase in general fund appropriations, and keep in mind that these numbers don’t take into account university spending done directly from the state’s special funds on this like new buildings and the like:

Notice on this same chart, which was put together by Legislative Council, that enrollment at the state’s universities has been largely stagnant despite this big increase in spending.

Absent a corresponding increase in enrollment, what were the universities spending all this money on?

That’s a question which needs answering before we go committing Legacy Fund dollars to the universities.

Also worth answering is why the universities can’t go back to their pre-oil boom budgets.

This, again, is the fundamental problem with the budget debate in North Dakota right now. Lawmakers built booming spending on top of oil boom revenues. Now that the oil boom is over, and the booming revenues are gone away, many people want to keep the boom-era spending in place (and support it with new taxes, if you can believe that).

Eventually lawmakers are going to have to figure out what they’re doing with the Legacy Fund. It was created by a constitutional amendment, but that law doesn’t give any direction as to the use of the funds. But using the fund to prop up unsustainable boom-era spending is a really, really bad idea.