Lawmakers hope for 'future fund' after North Dakota trip
CHARLESTON, W.Va. -- West Virginia legislators from both parties say they are hopeful about the prospects of setting up a "future fund" based on oil and gas revenues, after spending Thursday in meetings in North Dakota learning how that state's legislature went about setting up a similar fund.
Senate President Jeff Kessler, D-Marshall, who spearheaded the trip of 19 legislators, said that he fully expects to propose legislation that would use oil and gas severance taxes to create a permanent fund for infrastructure, economic development or future tax relief.
"I would expect it would have broad and [party] line-breaking support," said Kessler, who has long advocated for such a fund. "The folks I've talked to from the Republican Party have been favorable.
"I don't think it's liberal or conservative for folks to say it's a good idea to save money."
Sen. Dave Sypolt, R-Preston, one of four Republican legislators who made the trip to North Dakota, said that he's supported a "future fund" for several years and continues to, but that the trip had given him further insights in how to set up a fund and get legislation passed.
"I can see the pathway now that it could be achieved, possibly, and we would perhaps not fall into the same traps that North Dakota fell into the past few years," Sypolt said.
North Dakota's Legacy Fund has collected about $1.3 billion since it was enacted in 2011, exceeding forecasts by about 40 percent. But it was only successful on its third attempt, failing on two prior attempts.
Several years ago North Dakota set up a fund, in state code, to fund future projects through severance taxes. But that fund proved all too tempting for lawmakers to raid when it came time to write annual budgets.
So in 2009, North Dakota attempted to establish a constitutional fund that could not be tapped at a whim whenever finances got a little tight.
Voters rejected that amendment because, lawmakers said Thursday, the percentage of tax revenues it would have collected was far too high.
Finally, in 2010, voters overwhelmingly approved a second constitutional amendment that collects 30 percent of oil and gas tax revenue for the fund and cannot be spent at all until 2017.
Once legislators do begin to tap into the fund, they will primarily be using the interest to fund projects. Spending any of the principal requires at least a two-thirds vote in both legislatures and they can never spend more than 15 percent of the principal in any two-year period.
Sypolt wants to see West Virginia go the constitutional amendment route.
"First of all, it makes it more permanent so it's less likely to be defunded or changed in the near future, and second of all, it makes the participation of the citizens paramount, they must go to the ballots and approve it," he said.
An amendment to the West Virginia Constitution would have to be approved by two-thirds of both the House and the Senate and would also need to be approved by state voters.
Kessler said that he would seriously consider a constitutional amendment, after he's discussed it with other legislators and studied other states, like Wyoming and Alaska, that have set up similar funds.
"I think folks don't believe that legislators and legislatures will have the discipline not to spend it as fast as it comes in," Kessler said. "No matter who's in charge we're going to have a balanced budget because we're constitutionally required to. We've never had the foresight to save any for the future."
He did point to West Virginia's two rainy day funds, which together have nearly $1 billion, but said that they were dedicated to health care and natural disasters, not economic development.
He also said that any proposed future fund would focus only on oil and gas severance tax revenue, not coal.
"We may have missed the boat on coal, frankly -- the opportunities when it was most plentiful and easiest to get to and had the greatest demand -- it may have reached its zenith, unfortunately," Kessler said. "I'm not saying it's not still going to be a viable and important part of our energy portfolio."
Corky DeMarco, the executive director of the West Virginia Oil and Natural Gas Association, was one of several non-legislators who also made the trip.
He cautioned that North Dakota produces about 100 times more oil than West Virginia does, so people should not expect a hypothetical West Virginia fund to grow as fast as North Dakota's has.
Ted Boettner, director of the West Virginia Center on Budget and Policy, a left-leaning think tank, also made the trip to North Dakota. Boettner pointed out that the effective severance tax rate in North Dakota is approximately double the severance tax rate in West Virginia.
DeMarco did not want to commit to supporting anything before legislation was written, but did not oppose the idea of a fund.
"From the standpoint of what we can leave for our children and our grandchildren in West Virginia, we need to think about this," he said.
Sypolt expressed a similar sentiment. "West Virginia has been blessed with rich natural resources and to let all that wealth and resources be trucked our or piped out of the state without leaving a legacy behind for our children or grandchildren would be a shame," he said.
Reach David Gutman at firstname.lastname@example.org or 304-348-5119.