North Dakota’s Legacy Fund is poised to have a new focus and, if done right, it will benefit in-state businesses.
A new in-state investment program will use a 3% allocation from the Legacy Fund toward private capital. The program could go as high as 6%. The fund presently sits at $8.1 billion.
Since the Legacy Fund was created, there has been debate over how the money should be used. Some believe the fund should be targeted for future generations while others favor more immediate needs. It’s an argument that may never be resolved.
However, investing in state businesses and programs could help achieve both goals. It could have the immediate impact of helping businesses get established and grow along with the long-term result of a stable and diversified economy.
The investment program won’t happen overnight. It may take months or possibly years to implement. The first steps were taken this week when the State Investment Board heard presentations from three firms seeking to manage the program. Once a manager and strategy are in place, the program can move forward.
Voters approved the Legacy Fund in 2010 allowing 30% of monthly oil and gas tax revenues to go into the fund. It grew faster than many people predicted.
The Tribune believes in-state investment could be a win-win for everyone involved. It’s essential that the businesses the state invests in are well-vetted. We know there are no sure things, but there needs to be a high level of confidence in the business plans. State leaders appear to realize this.
“This is like a first shot at moving forward and taking our first stab at it and trying to it right,” said Lt. Gov. Brent Sanford, who chairs the 12-member State Investment Board.
The Tribune also agrees with Dave Hunter, State Retirement & Investment Office executive director and chief investment officer, who said that investment opportunities likely will include smaller businesses that need additional capital to grow.
House Bill 1425, making its way through the Legislature, would add to in-state investment efforts. Sponsored by Rep. Mike Nathe, R-Bismarck, and easily approved by the House, it would direct the board to invest up to 20% of the Legacy Fund in the state, putting half in equities, or investing in companies in the state, and the other half in infrastructure loans to local governments and other development projects through the Bank of North Dakota.
It’s an ambitious bill, and the Senate needs to decide if it’s a good fit for the new in-state investment program or if the Legislature needs to wait two years to see how the program is working.
The key to the new investment program and House Bill 1425 will be how they are managed. The manager needs to be shielded from outside influences. The manager will be making financial decisions, not political ones.
Investing in the state makes sense, and if done right it will provide for a brighter future.