The measure on the Nov. 5 ballot would change some of the rules and definitions surrounding the Legacy Fund, established by voters in 2010 as a trust fund for 30% of the state’s oil and gas production taxes.

“It’s grown faster than we anticipated,” said Rep. Corey Mock, D-Grand Forks. “We didn’t think the Legacy Fund would hit a billion dollars for at least 10 years.”

The Legacy Fund currently holds more than $10 billion.

Under terms established when the fund was created in 2011, the Legislature can spend up to 15% of the principal with a two-thirds vote. The expectation was that 15% would amount to $150 million in 10 years. Given the size of the fund today, the Legislature has proposed to reduce the eligible spending of principal to 5%, which comes to $500 million, said Mock, a sponsor of the legislative resolution creating the constitutional change in Measure 3.

The reduction in principal that can be spent is one piece of Measure 3. Another piece deals with the fund’s earnings.

Earnings from the Legacy Fund could not be tapped for the first seven years, but now, earnings automatically go into the general fund on June 30 of every odd-numbered year.

A technical change in Measure 3 eliminates the June 30 distribution and replaces it with language stating the earnings will go into a Legacy earnings fund, which can be invested. Currently, earnings aren’t being invested.

Mock said market fluctuations make tying distributions to a particular date problematic. The market could be bullish or it could be the opposite, forcing the state to sell assets at a loss, he said.

“Because we were calculating everything on a specific date, it made it very difficult for the managers to budget, to predict and to invest wisely. But it’s the only fund where we do it this way,” Mock said, noting other state funds use a rolling average.

In addition to the Measure 3 resolution, the Legislature passed Senate Bill 2330, which defines Legacy earnings as 7% of the rolling five-year average of the fund balance.

“That can be liquidated and maintained in a cash account for the transfer without the risk of penalty. We’re not jeopardizing our stock positions. We’re not having to change our investment strategy because of the timing,” Mock said. “It’s far more predictable. We already know what we’re going to have for earnings next year.”

A fiscal analysis prepared by the Legislative Council using inputs from state investment managers showed the impact of the changes associated with Measure 3 and SB 2330 are significant, Mock said.

Under the current earnings definition and the fund’s 5.5% return, by 2035, the Legacy Fund would contain about $20 billion, with earnings of about $1.3 billion. By 2045, the fund would have just over $30.3 billion, with earnings of $2 billion. In 2055, the fund would have $41.3 billion, producing $2.8 billion in earnings.

With the proposed changes to principal spending and the earnings definition, as well as a 7.2% return, by 2035 the Legacy Fund could contain more than $24.6 billion, producing $1.4 billion in earnings, or about $100,000 more than not making the changes. However, by 2045, the fund would be expected to grow to $43 billion, generating earnings of more than $2.6 billion, and in 2055, the $65.5 billion fund would generate more than $4 billion.

Mock said the investment board views the 7.2% return as realistic, but even scenarios using lesser returns generate significantly more earnings than currently.

The numbers used in the projections also forecast a declining amount of oil revenue going into the fund. The projections are based on input from the North Dakota Department of Mineral Resources, Mock said.

SB 2330 passed the House and Senate without dissent. House Concurrent Resolutions 3033, which created Measure 3, passed the Senate 45-1 and House 92-1.

Voters will decide on Nov. 5 whether they also want to support the changes to the Legacy Fund in Measure 3 with a “yes” vote.

“The bill went through a lot of variations and we brought forward what we think is a very, very responsible measure,” Mock said. “People really understand the Legacy Fund is an important asset, and this minor change can have a meaningful impact.”

Measure 1 replaces

outdated language

North Dakota voters will decide on replacing outdated language in their state constitution with new definitions in Measure 1 on the Nov. 5 ballot.

Measure 1 was placed on the ballot by the 2023 Legislature.

The measure replaces “school for the deaf and dumb of North Dakota” with “school for the deaf and hard of hearing” in its constitutional reference. A “state hospital for the insane” would become “state hospital for the care of individuals with mental illness.” An “institution for the feebleminded” would become “facility for individuals with developmental disabilities,” and a “state hospital for the mentally ill” would change to “state hospital for the care of individuals with mental illness.”

A “yes” vote on Measure 1 would make those changes.