(regal music) - Hello and welcome to Legislative Review on Prairie Public.

I'm Dave Thompson, thanks for joining us.

Our guest this week is the chairman of the Education and Environment subsection of House Appropriations, representative Mike Nathe of Bismarck.

Representative, thanks for being here.

- Thanks for having me, I appreciate it.

- You had a very busy first part of the session in your division because you had the higher education budget plus a number of other things.

Higher education, you were able to accomplish something that you said hadn't been done for 20 plus years and that's the tuition freeze.

- 28 years to be specific.

And it's the first time in that we've been able to freeze tuition and you know, we're in a wonderful, fantastic financial position as a state right now, you know, and because of that we're talking about property tax relief and other programs that we want to give back to our citizens.

And we just thought our division, you know, we wanna do some of this and do it in a form of a tuition freeze and give it back to our students and the families that support the students.

So we're very proud of that.

It's about 47 million to do the tuition freeze.

It's a two year freeze.

One of the concerns I had was to make sure in year three that it doesn't springboard up.

And we were able to do some things within the formula to make sure that that is smoothed out.

So there's not a great big jump after the first two years.

But we're very proud of that.

The bill has a great, we have a couple other great things in there.

We have a big capital construction project that's a four year plan, about 330 million dollars.

And then we are also came up with a crisis care mother, for a single mothers, single parents, I should say, that may be in college.

And all of a sudden they have an unexpected pregnancy.

They have children under the age of four to help school start programs to help those students to keep them in school, thus keeping 'em in the workforce.

So we did, I think, a lot of good things in that budget.

I'm pretty proud of it.

- I wanted to ask about that four year plan for school construction.

Because legislators meet every two years and a legislature can't bind a future legislation to do anything.

How does that work?

- Well, you know, as you know Dave, in the past when it came to higher ed and construction buildings, it was kinda like the Hunger Games.

Everybody came in and everybody was making their pitch to get their buildings built.

Representative C Swantech, representative Mark Sanford on the committee came up with this plan.

I think it really organizes it quite well.

And it's kind of each school's top priority building that they want to take care of.

So it's on there, they have four years to do it.

And the reason why we gave them four years is because there's a match.

The two big schools come up with a match portion.

The smaller schools have a little smaller match that they have to come up with.

So we give them some time to raise that match money.

Once they raise the match money, then they are entitled to the money for their construction project.

And it does give some nice order to it.

- Okay, you add another amendment on there concerning presidents who get non-renewed and how they have to deal with paying off their contract or whatever kind of benefits they agree to.

- Yeah, well you know, there was some consternation about the buy-out package for the former NDSU president, Dean Burshani.

And we had actually a couple amendments in that regard.

The first one having to do with that very buyout.

And the committee felt very, very strongly about this.

So we came up with an amendment that his buyout then would be paid through the higher ed office and not through the school itself.

Because the school was not part of the buyout plan.

NDSU is in some financial trouble.

And we just felt it was a more of a fair process that since they didn't have an hand in the buyout, that that buyout would be taken care of through the finances, through the higher ed office.

The other one we have is for future buyouts.

And you know, a lot of lawmakers like myself, we don't hear about these buyouts.

We don't hear anything until much later when the public finds out.

But yet there's a lot of criticism if a buyout isn't written away that wanted to, so the way that amendment works and next time they do a buyout with a president, it will then mo move from there to the emergency commission, which is made up of the Governor and Attorney General and Secretary of State.

They will review the buyout plan.

If that is approved, then it does move to the budget section where we have all the appropriators from the House and Senate will go through that.

And if they approve that, then the buyout plan is a go.

So just some more transparency, some more eyes on it to see what's going on.

- No surprise, the Board of Higher Education has voted to oppose those amendments, both the central office payment and also going through the budget section and things like that.

Their argument is, is that the Board of Higher Education has constitutional authority to deal with this and it's a usurping of constitutional authority.

- Well, we'll see how that plays out, right?

I mean, you know, it's the legislature then that has to pick up the tab and pay for that.

So I think there's arguments on both sides of that, but we'll see how that plays out in the future.

- What were some of the other big issues out of your subcommittee?

- We have the Commerce Department budget, which is a very big budget in there.

You know, workforce is the key word up there right now in the session 'cause we are having, facing major workforce needs around the state.

The commerce budget helps with the numerous programs, help with attracting workforce, with training workforce, and with attaining workforce.

So automation grants, those sorts of things.

So that is really one of the bigger keys that we had, we had some monies in there for the UAS, the unmanned area drone industry up in Grand Forks.

And we funded that pretty well, actually above the Governor's suggested budget.

And then we have another one called the North Dakota Development Fund, which is kind of a closing fund to help companies come here, help them get them going, and then spring up some businesses around the state.

- So that's another incentive for a company to come here?

- Correct, yeah, yup.

And there's some talk about a possible fertilizer plant up in the northwest part of the state.

We wanted to have some monies in that fund.

So if that does come to fruition, we can step up to the plate right away and keep facilitating that plant.

And if that plant were to come, it's, you know, it's a roughly a 4 billion dollar plant that would take several years to build.

So you're looking, about four years to build actually.

But you're looking at thousands of construction jobs in the meantime.

And if that plant were to come online, that plant would take a lot of gas off the oil field when would thus spur drilling, thus it'd be more oil revenue for the state.

And then the byproduct, the fertilizer, which would then provide most of the fertilizer needs for North Dakota, which we're having an issue right now in the upper Midwest.

So if that plant were to come online, it would take care of our two biggest initiatives in the state.

So we wanted to make sure we had money in this fund to be ready to go if it does happen.

- Now, again, things tie into each other quite easily.

You talk about natural gas coming from the Bachan, will that spur development of the pipeline that has been proposed for a few years now?

- Yeah, you know, we had put money aside after last session and we didn't have anybody take the RFP to pipe that gas out to the east.

But I do know there's some legislation working on helping with some of the pipeline capacity, taking more of that pipeline and taking that in there.

So yeah, it is a big issue for us up there.

We have a lot of gas up there and we need to take it off that field so we can keep the drilling going.

- One thing that Justin Cringstad of the Pipeline Authority Directors said that there's still a lot of interest in building that pipeline.

The problem was they didn't have a specified end user for the gas.

But now with this other fund, maybe you can get a specified end user.

- Absolutely right, because you know, with the plant, we're talking about going to the Northwest and with what Mr. Cringstad is talking about, we're trying to get gas out to the east out to eastern part of the state that that needs it out there.

And then let's face it, the economy, the inflation didn't help matters any either on that proposed pipeline.

- Another issue that you've been, you dealt with, actually there's competing bills.

House has its own bill, Senate has its own bill.

It's about the change in retirement plans, possibly going from a defined benefit plan for state employees to a defined contribution plan.

House passes a defined contribution plan, Senate passes a defined benefit plan.

Are we seeing perhaps this may be one of the final issues of the session?

- I think it'll be one of the bigger issues of the session.

And it is a big issue and, you know, the state's not gonna shirk us responsibility to provide the pensions to our longtime state employees who are extremely valuable to us.

But at least the House plan is a plan that's gonna deal with the newer, the new employees coming on.

There was numerous talk about how the newer employees come on now they're younger, they're looking to be more mobile, they're not a generation that looks to be in a job for 10, 20, 30 years.

So the contribution option fits their needs better.

And we are in trouble, we're about 1.8 billion in the hole on this plan.

And if we keep going, that just keeps getting, our liability keeps getting bigger and bigger.

So we needed to do something.

Representative leader Mike Lafour has worked on this for well over a couple years along with several others in the House.

And I think what we have in, what we passed in the House the other day is a very good plan going forward.

And again, it doesn't affect any of the current state workers in the plan.

This will only affect new people as they come on board.

So with both bills passing, it's gonna be interesting to see what happens.

I suspect Dave, that it's gonna be a lot of talk with leadership and as far as which way, which road we should go down.

- I know that the opponents in the House, and Representative Mock brought it up that the legislation knew about this in the late 2000's, after the stock market crash of 2008, things went south and there was a plan, he said there was a plan in place to fix it and there was four doses.

He was talking about a cancer dose, and he said we did three but we didn't do the fourth.

And now here we are.

- Yeah and I believe, I think the dollar amount was maybe in 10 or 12, somewhere in that area but if we would've injected 400 million at that time, that we would not be in the position that we are today.

And we didn't.

- [Dave] Why didn't that happen?

- I, you know how it goes when it comes to finances and funding.

Sometimes there's other things that took priority at the time.

This was not high on the list at the time.

You know, hindsight's 20/20, I mean we all wish we would've did it now at that time, but I think we were looking at other things.

We were looking at the boom that was just hitting North Dakota, you know, we were looking out west.

I know that was a top priority.

So it just, I think Dave, wasn't as high on the list as it is obviously today.

So it was a real big missed opportunity on our part.

- So this is one to watch.

- Oh, absolutely.

I think it's one of the top three, three issues towards the end of the session as we get along, as we get down to that conference season.

Yes, it's gonna be a biggie.

- When some of us were thinking about the top issues and you mentioned it already, workforce development and along with that comes childcare.

So that's going to be, that is a huge issue.

The House has has come up with some plans, correct?

- Correct, I mean, again, a lot of it's through the commerce department that the Governor proposed, but there's a lot of bills out there, Dave, that are addressing workforce issues.

The higher ed budget, we tried to address that too.

With expanding a lot of programs, we have 25 million in scholarships that we passed in the higher ed program.

A lot of those are workforce related scholarships to get these students into the workforce here in North Dakota.

- I think there's a lot of interest in that among businesses in North Dakota.

- Oh, absolutely.

Because all we hear is that they cannot find workforce.

If there's one thing that's gonna stunt our economic growth in this state, it is the lack of workforce.

We need to find people, we need to find ways to bring people in, train people, and retain those people in these jobs.

So it is the number one issue for a lot of businesses in this state.

- And childcare is part of it.

There seems to be a lack of resistance now for some kind of state support for childcare.

And I remember the discussions several sessions ago.

There was an awful lot of resistance to that.

- Yeah, but again it comes down to workforce, right?

What will it take to keep these workers here, to bring him in?

And if you have a parent who has a child at home and he needs some help with his childcare, these are the things that business is gonna have to do to entice these employees to stay with them or to come into their job, is also a good benefit package, good pay, oh by the way, here's some childcare that we can help you with too, to keep them.

So businesses have to be nimble when it comes to that.

And I think that's exactly what you're seeing right now.

- Another big issue is going to be tax relief because there's a lot of people who say, we like the income tax bills and there were three of 'em that, that were passed.

Or we want property tax relief.

And this could be another interesting conference committee when it gets down to it.

- Yeah, exactly right.

And when you're talking taxes, you get everybody's attention, correct.

So we had the three, two income tax bills and homestead tax credit bill that passed outta the House the other day.

It's now in the Senate.

The Senate sent us the property tax bill over, I'm actually a co-sponsor on that.

And it's two different types of taxes, right?

One dealing with income and one with property.

And property is always a hot button issue.

So, and there's a lot of strong beliefs on both sides of this.

So that's gonna be one of the other ones along with the pension plan that's I think gonna come right down to the wire.

I did think in the beginning of the session, maybe both chambers and leadership could maybe agree early on something, but there's a lot of different opinions on all those plans.

So it just depends what your take is on it.

- I know that a lot of people say, you hear most complaints about property tax, that the conundrum is a state does not levy property taxes.

The state can take care of income taxes and those who support income tax breaks say, hey this affects everybody who pays taxes.

So there there's a real, you know.

- Yeah, you know as far as property taxes, you know, the state does control part of property tax 'cause we control the education part of it.

So we control about half of the property tax.

We do not control the city and state.

So we can control it with education funding.

If we buy down the mills then it's this less on your property tax within education.

When you're taking a look at the income tax, not everybody pays income tax, right?

It's more on the higher earners, that sort of thing.

So, but yet those people deserve it, you know, deserve a break too.

So that's why I think Dave, when we go forward, there's talk about having a package, a little bit of all of this into a package under a certain dollar amount and doing that.

And I think the dollar amount's gonna be figured out as we go along because we're gonna have the revised revenue forecast in March.

And I think some of this stuff is gonna kind of be idling right now until we find out what that number is.

- Forgive me, I can't remember.

Are you part, are you on the Shilo bill?

- Yes, I am.

- The property, okay.

And he has cut it down.

What there's so many mills that a school district has to levy in order to qualify for the formula.

It's 60, the bill now is cutting that back to 40.

So that's immediate property tax relief.

He talked about a 3% increase K-12 funding.

But he said that's a placeholder because the March forecast that you just referenced could be better than that.

- Yeah, it could be much better.

And from what we're hearing, I think it is gonna gonna be much better than that.

So, you know, the Senate had, you know, his original bill was from the 60 mills cut in a half down to down to 30.

It was not Senator Schley's objective to go down to 40.

That was done with an appropriation.

So, and I, with that bill, I think that provides about 18% property tax relief versus the 25% did the original bill had.

And as far as the three and three, the per pupil payment, definitely that's gonna come down to what we see in the revenue forecast.

And again we have the K-12 budget in my section and that's gonna be one of our big priorities to see what that payment is.

- So you're really being looking at that March revenue forecast for a number of things.

- Absolutely, yeah, absolutely.

So we'll see what we have to work with and, you know, we got some numbers earlier in the week where we were sitting with the general fund money at that time we were about 585 million in the black, the SIF money, the what I call general fund two, basically.

We're about 135 million in the red, which is unprecedented.

Usually at the halfway point Dave, we are about a billion dollars in the red.

So, and that's with most of the big budgets already in that summary.

So I'm sure it's a little less now with some of the budgets that we passed out yesterday when we went home.

But I think we are sitting absolutely in a great position right now financially and I'm excited to wait to see what that revenue forecast is because it could even be better than we think it is.

- Now besides K-12, what are the big issues that your sub-committee is gonna be dealing with?

- Well we have the water budget and that's always a big one.

And we have a lot of water needs around this state.

We, you know, it's 800 to a billion dollars worth of money in there for these water projects.

So it's something that my committee's got a lot of work to do.

We had longtime member Jim Schmidt, who's no longer there, was our water guy.

And he knew that budget inside and out.

So we all now have to do a lot of work and get up to speed on it.

And we have been doing that all session.

A couple of my members have been getting up to speed 'cause we know this is a big one that once we get it, so, and water obviously out east is a big deal and out west too.

But a lot of projects, a lot of stuff we need to take a look at.

- At least the diversion, the Red River diversion plan is off the table.

- Yeah, we took care of that last session with a bonding bill and took that money off the table.

And you know, and Dave, that's one thing about the great financial position that we're in.

We are addressing some of these long-term projects that we've been paying on for years and we are able now to pay those off, basically pay 'em and get 'em off the table so when we come back next session, we don't have to worry about funding those because we don't know what our revenue will be next session as, you know, we could have a good position or we couldn't.

So I really like the mindset of the leadership saying, let's just pay some of these certain projects off while we have this money.

So it helps lighten the load two years from now.

- One thing you'll be considering, probably will be the Mouse River or Service River Diversion project and flood control project for the Service River there, and might, would like to accelerate the timeframe because of construction inflation.

Have you looked at that proposal?

- You know, I haven't had chance to take a look at any of that as, you know, we just, you know, we just finished yesterday so that's something I'll be taking a look at here next couple days before we come back in on next week.

So like I said, I feel like I'm studying for a final every day when I take a look at these budgets.

But that's the big one in our committee and not just one person does that.

It's gonna take several of us to jump on there and learn it.

- And of course the other one is the potential for a Red River Valley water supply project.

Based on times of drought, which is, you don't think about times of drought when you've seen the floods in the Red River Valley, but in the thirties you could actually walk across a Red River in Fargo it was down so low.

- Yeah, and they need water out there for not just for drinking water and stuff, but also for industry and for growth quite frankly.

So, you know, it's water and the natural gas that we talked about earlier, and we have that out here we have to get ways to get it out east to help 'cause that is our biggest, highly populated area in the state.

So we need to get on that.

- That's gonna be a little bit of work though.

How do you do it, where do you have the intake?

I think the intake might be settled from the reservoir.

- I've heard some things they're digging a big hole up in Washburn, which I saw last January, then I've heard some other options.

So I have a lot of questions about that when we go in here in the second half to find out exactly what this is 'cause I've heard several different stories from several different people.

So we need to get some clarification on that and see where we're going with that.

- Outside of money issues, are there other issues that are really interesting to you that you're watching?

- Well you know, we had the school choice bill the other day that we passed in the House.

And that brought a lot of discussion.

And I've been part of that movement even 10 years ago when I was the House Education Chair and we didn't get it through, but we were able to get it through the other night.

And that is a big deal, I think.

We have 7,700 private school children in the state and we were able to help these families, give them some relief 'cause they are saving the state about 150 some million dollars in a bi-annum, by sending their kids a private school.

Kids that we as a state don't have to pay for.

So that's a big one going forward.

Again, I, you know, I think it's the workforce, everything that we've touched on already are some of the real big things that we gotta take a look at.

- It is amazing how these are huge issues this time, really huge, but there's a potential to solve them because of the money situation.

- Yeah, exactly right.

And we need and we need to be smart about how we do that, Dave.

I mean, you know, it's just, you know, I think sometimes we, rightly or wrongly we get labeled, well, you know, all you guys do is spend up there, spend up there.

But we are growing, I've been in the legislature 15 years and our population has grown almost 200,000 people in that time.

So I'm a business owner.

If my business were to expand that much, I would have to add on new wing to the building, add on new staff, new everything else just to accommodate the new business.

And state government, the way we're going, is no different the way the state is.

And so, you know, there's growing pains when you have this much growth that we have, you need to spend your money wisely.

And I think we're doing that.

I think the timing is absolutely wonderful with the revenues that we we're sitting on right now.

Because our reserves are full, we're ahead of projections, and yes, oil is a big thing of it, but you know, it's how you manage that money.

There's people out there that say they win the lottery, well within a year they blow all the money, right?

So it really comes down to how you manage that windfall of money.

And I think we've done a pretty good job, especially the last several sessions.

- I wanted to ask you about the Attorney General's budget because he has a big request and one of the things was the movement of the crime lab from direct supervision by the Attorney General under BCI.

Well that didn't fare so well.

So what do you think about the Attorney General's budget and where do you think it might be going?

- Well I think the Attorney General's budget is very valid to be quite honest with you, because again, with the growth of the state that we've seen, we also have the growth of crime.

And you know, the number one concern for our citizens is safety.

And it should be our number one concern.

And if the Attorney General needs more weapons needs more tools to fight crime, we should definitely take a hard look at that and think hard about funding that.

Because again, Attorney General Wrigley I know this summer had a press conference and he showed charts and graphs with rising crime and all these other things.

And again, that comes with growth.

But we're seeing people coming from Mexico with meth, we're seeing the gangs out of Detroit coming in here.

So we need to give them the tools to help fight do this.

So as a friend of mine once had said recently, he said they are at war, the AG is at war trying to keep our people safe in the state.

So if Attorney General Wrigley needs some more tools and some more money, I say we need to take a good hard look in doing that.

I know the Senate has funded, I think the original FTE request was 23, I think the Senate came back with 15 or 16.

So we'll take a look at the other ones that they didn't do, and then we'll talk to Attorney General Wrigley about the lab situation and those sorts of things.

I'm sure we'll revisit the overrun and all that kind of stuff.

So we'll take a look at all that.

- I'm putting my toe in the water a little bit here, and that's the current situation, the Sturman Dram concerning the auditor, and the situation with that.

What's your take on that?

- Well, I have quite a bit of take on that 'cause I've been in the middle of some of that stuff, as you well know with the commerce audit a couple years ago and those sorts of things.

It'd unfortunate that, I think the unfortunate thing is the opinion piece that was written the other day, calling the legislature corrupt.

Corrupt is a very strong and powerful word.

And if you're gonna say that, I mean that's, you better have some backup and do that other than just being kind of thin-skinned and saying, hey, they're coming after me again, so.

You know, the legislators are hearing complaints about from the political subs from the cities and counties about the cost of these audits.

And we had the bill up on the floor and quite frankly during the House debate there was compliments about how, hey, they're doing their job, they're doing their job well.

There was really no personal attacks.

But I think the office felt that they were, the bill itself was a personal attack.

And it certainly wasn't, I think the legislature was just responding to what we've been hearing from the political subs as far as the charging of the fees.

Now there was some unfortunate language, one of a legislator used the word laundering and that sort of stuff.

That was very unfortunate.

But yeah, it's, you know, nothing's still playing out yet.

So the House gets the auditor budget in the second half.

It's not in my division, it's in a different division, and they'll take a good hard look at that too.

- So you think cooler heads may still prevail on us?

- Yes, yeah, it definitely will prevail.

I'm sure they'll still be some tense, there'll be maybe some hard feelings going in.

Again, you just don't get us call corrupt and then, well, I didn't mean it, it's okay.

I mean those things will linger.

So will that be a factor?

That may be a little factor in some of the things going forward, so.

But I have no doubt at the end of the day, Dave, we'll come up with a good budget and the auditors, and maybe not everybody will like it, but we'll come up with a good plan.

- Now we have a couple minutes left and I really wanted to get into corrections because there are proposals of course for a new women's prison in Mandan.

There are some talk about maybe getting rid of the Missouri River Correctional Center in Bismarck and having a new mission for the New England facility.

There's a lot of chess pieces at play on that one too.

What's your take on that?

- Again, that's not in my section, but you know, I think it's needed.

You know, we debated on the floor the other day, the 161 million dollar new prison was in the bill, was taken out during the debate.

We had a pizza break there in the middle of the night, came back and put it back in.

But I come from the standpoint they need it.

And right now they're, I think they're over a hundred percent capacity.

They have hard time with some services out there 'cause they're New England's a ways away from health services and those sorts of things.

So if we don't build it now, rather than costing the state 161 million and we wait another year, two, three more years, it may be 250, 300 million for the same thing.

So I get it that it's expensive, but I think it's something that we badly need and we need to do it right away.

- There's a whispered thing, and I'm just going to mention this briefly.

Construction inflation is at least being talked about in hushed tones.

- Oh yeah, in the higher ed budget we had schools come up to us and we want inflation money for this, that, and the other thing.

Other budgets, we've heard the same thing.

Some budgets have gotten inflation money, some budgets have not gotten any inflation money.

So we'll see, you know, it's the embarrassment enriches when you have a lot of money, everybody then wants it.

- Okay, few seconds we have left.

I'm asking everybody, when do you adjourn?

- I would say, we'll save five days.

- Five days.

- You've asked me that before in these things.

I'm always wrong, but I'm gonna go with five days this time.

- Okay, maybe you'll get it right this time.

- Hopefully (laughing) (laughing) Our guest on Legislative Review this week, Representative Mike Nathe of Bismarck.

For Prairie Public and Legislative Review, I'm Dave Thompson.

(regal music)