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Kelly Schmidt

State Treasurer Kelly Schmidt testifies on a bill clarifying North Dakota oil extraction tax allocations Wednesday. 

North Dakota education and water groups urged state lawmakers to repay three constitutional funds that they said were shorted millions of oil tax dollars in recent years Wednesday.

The Senate Finance and Taxation Committee considered legislation addressing the recent discovery by North Dakota Land Commissioner Jodi Smith that two funds meant to benefit the state's public schools were shorted $137 million over roughly the past decade. In addition, about $125 million meant for a water project fund was also distributed to other state buckets since 2008, according to State Engineer Garland Erbele.

Smith told lawmakers that the Land Board, a panel chaired by Republican Gov. Doug Burgum that oversees her department, supports the Senate Bill 2362 to "create clarity in the statute," but she also pushed for repaying the Common Schools Trust Fund, which supplements state aid to schools.

"The effects of not repaying the (fund) will impact education in the state of North Dakota for generations to come," Smith said in prepared testimony.

The Common Schools Trust Fund is the only fund in question that Smith's agency directly oversees. The Foundation Aid Stabilization Fund is meant as a safety net for education funding.

The Resources Trust Fund, which is intended to fund water projects and energy conservation programs, is also written into the state constitution, but the percentage of oil extraction tax dollars it receives is dictated by state law.

Burgum supports repaying all three funds, his spokesman Mike Nowatzki said.

At the center of Wednesday's hearing were questions over how to allocate the state's share of oil extraction taxes generated by activity on the Fort Berthold Indian Reservation. A nonpartisan legislative staffer detailed prior legislative action on the taxes for the committee, peppering her testimony with phrases like "unclear," "ambiguous" and "some confusion."

"I believe that there are arguments that could be made on both sides of this," said Legislative Council attorney Emily Thompson.

But Roscoe Streyle, a former House Republican lawmaker, said it was "plain as day" that the money should have been allocated differently. He said lawmakers had a constitutional duty to make the funds whole.

GOP legislative leaders, however, have expressed little interest in a retroactive solution. They have argued that schools ultimately weren't shortchanged because lawmakers found other pots of money and that the state treasurer's office was following guidance from the attorney general's office.

As introduced, the Senate bill would address all three constitutional funds to clarify money should be allocated as Smith has outlined going forward, but it contains no repayment provision, said Sen. Dwight Cook, R-Mandan, the bill's primary sponsor.

North Dakota United President Nick Archuelta, whose organization represents educators in the state, previously said they weren't eyeing legal action but were keeping their options open.

State Treasurer Kelly Schmidt, a Republican whose office is responsible for distributing state funds, told the committee about prior efforts to clear up the allocations that fell short in the Legislature. She said her office "diligently" moves money based on law, stating that they spend an "exorbitant amount of time and talent on oil and gas" issues due to a sharp rise in revenues and constant changes in how the funds are allocated.

The tax committee didn't take immediate action on the bill after Tuesday's hearing.

"It is time we have a piece of legislation to remove the ambiguity," said Cook, the committee's chairman. "That's the intent of Senate Bill 2362, to do what should have been done probably a long time ago."

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