North Dakota Could earn an Extra $30M Over 12 Months With Changes to Legacy Fund Investments

Rep. Keith Kempenich and Treasurer Thomas Beadle listen during a Legacy and Budget Stabilization Fund Advisory Board meeting on Nov. 12, 2024. (Mary Steurer/North Dakota Monitor)

(North Dakota Monitor) – North Dakota has a chance to make more money off its investments after voters narrowly approved a ballot measure last week that limits spending of the state’s largest trust fund.

The Legacy Fund was created through a constitutional amendment in 2010. It’s meant to be a source of perpetual revenue for the state, and is supported by oil taxes. As of the end of August, the fund’s value was about $11.4 billion.

Measure 3 made it so that the state can spend no more than 5% of the Legacy Fund’s principal per biennium. Based on August figures, 5% of the principal would equate to roughly $540 million. Previously, this cap was 15%, or about $1.62 billion. Lawmakers have so far not spent any of the Legacy Fund principal, but the option is there with the approval of two-thirds of the Legislature.

About 52% of voters supported the measure, according to complete but unofficial results published by the Secretary of State’s Office.

The change presents an opportunity to put more of the principal toward longer-term, more lucrative investments, Scott Anderson, chief investment officer for the Retirement and Investment Office, told officials during a Legacy and Budget Stabilization Fund Advisory Board meeting last week. The advisory board works with the State Investment Board to recommend changes to how the Legacy Fund is invested.

A study by consulting firm RVK estimated Measure 3 could increase Legacy Fund earnings by $30 million over the first year.

In order for that to happen, state officials will need to decide how to change how that 10% is invested. Anderson recommended that the board wait until after the 2025 session to weigh its options.

Anderson said that, given that the Federal Reserve has cut interest rates, capital markets are in a period of flux.

“And then we’re going into the legislative session, who knows what measures might be introduced that face the Legacy Fund?” he added.

Three lawmakers from Jamestown have announced their intent to bring a bill to mandate that all the Legacy Fund’s holdings be published online.