(upbeat marching music) - This is North Dakota Legislative Review on Prairie Public.

I'm Dave Thompson, thanks for joining us.

Our guest today is Bismarck Representative, Mike Nathe.

Representative Nathe, thank you for being here.

- Yeah, thanks for having me here today, Dave, it's a pleasure.

- I wanted to get you on the show for a number of purposes, but one, I wanna talk about property taxes because you are the main sponsor of the Big Property Tax Relief and shall I say, reform bill?

- [Mike] Yes.

- So where is that right now in the pipeline so to speak?

- Well, right now, the bill has passed out of house finance tax with a due pass and it is House Bill 1176.

It's in full appropriations.

And we're gonna be hearing that bill in another day or two.

So once we talk about it and kick it up back up to the house, it'll be taken up on the floor here within the next, or probably less than a week.

- Give me the thumbnail of what's in the bill.

- Well, in the bill is the 3% cap, which is the reform piece of it.

And that holds the political subs, the cities and the counties and the schools, holds 'em to 3%.

Meaning, for your layman out there, meaning that they cannot assess you any more than 3%, they cannot charge you any more than 3% of what they charged you in the previous tax statement.

And that is the true reform.

The way the bill came out now is 1450 would be a credit, like the $500 credit we passed last session, this would bump it up to 1450.

There's some relief in there for renters.

There's some things in there for people that qualify for the Homestead tax credit, which is an income-based requirement basically, for our seniors to help them with their property tax.

So the bill overall has had a lot of input, seven or eight different legislators that have input in this.

We've been working on it since summer.

Governor Armstrong won in November.

He came to us and we implemented his piece in there, which was 1550, came out of tax at 1440.

It's been a true team effort on 1176, Dave, and going forward, I feel it's got a lot of support.

A lot of support in the house and I think in the public too.

- Did you add some of the things from the other property tax bills that were introduced as well?

- No, this was just on its own.

So I know there's some other property tax bills behind this one that are coming up.

And some of those bills, I haven't personally heard yet, but we'll be hearing those in full appropriations too.

I know the big idea is about the ag.

There's a property tax bill, maybe dealing with some ag land and those sorts of things.

I kinda go back and forth on that because when I look at ag land, that's ag production, which is a business.

1176, the bill iPrize sponsors just for residences only.

Some of the other bills will tackle the ag land or other businesses in that area so which will also bump up the price tag.

So my thinking is, we've tried that over and over in the past, the $500 resident tax credit was a success.

So we went down this road and said, "Hey, why don't we just provide property tax release for just the residences?"

Because when I knocked on doors, it was all residences, but they didn't ask us to eliminate it.

They just wanted some relief and to slow it down.

So we heard them and that's how we came up with 1175, so.

- So what are you hearing from cities and counties on this?

- Well, the cities and counties you can imagine are not happy with this 'cause it's gonna restrict their spending quite frankly.

And it's gonna be a challenge.

Now, we've heard from other cities like Grand Forks who says, it's not a problem.

Their annual spend rate is about 1.9%, 2%, somewhere in that area.

Some of the counties and cities, the bigger ones who have growth.

And it will be a challenge, there's no doubt about that.

Some of those have to go higher than 3%.

So they're gonna have to learn, if the bill passes to live within that 3%.

Some of the smaller cities may be a little bit of a challenge in the bill.

The house finance of tax put in there that a political subdivision could get a reprieve from the 3% cap by the vote of the people.

And that cap, it came out of the house for 10 years.

Once they're outta the cap, they would be out for 10 years.

But I think there's some talk about knocking that down either four or two years.

So that might help some of the smaller cities that are having a hard time, but again, that comes at the vote of the public if they wanna remove that cap.

- One of the arguments that we heard early on is that Cass County is not like Slope County for example, Cass County may have sales taxes they could get to, but Slope County, which is, a very small population- - County.

Yeah, a lot of the counties and a lot of cities don't have a revenue source.

Right, because they're not growing in the tax base and those sorts of things.

So I thought it was a good idea that that was put in there by the tax committee to at least, give them another option out.

But they would have to go make their case to the people of that community to remove that cap.

- Now, there was an amendment to add some income tax cuts too.

- Yeah, and it came out of the finance tax with the $50 million income tax on there.

When the bill was brought up to the house and the amendments were debated, the house voted to take the $50 million income tax off of that.

And I know that it was a cause of some consternation amongst some people 'cause it really didn't have to do with property tax.

I know there's some discussion about maybe that coming back later in session and maybe a different bill or in a different chamber, I'm not sure.

But you know, last session we addressed it, we addressed income tax and did a pretty good job on that.

So I like the condition that the bill's in right now.

Again, I think it's laser-focused on residents and trying to get them the relief that they're asking for.

- So it's also understandable too.

- [Mike] Yes.

- The people can read it, they can understand what's in it and that will all probably help it as well and get support.

- Yeah.

As you know, these tax issues can be very, very complicated.

And if you're not in it every day like you and I are, you can get lost.

- I have to ask you about, since we're talking about taxes, a bill that passed in the house and that would add 3 cents on the gas tax to create a smaller community fund for counties, townships, and small cities for roads.

- Yeah.

Yeah, so 3%, and it is dedicated just to road improvements for a lot of the counties, like for the gravel roads and those sorts of things that, you know, we have a huge infrastructure needed in the state.

It is billions upon billions of dollars and one of the reasons why we passed Prairie Dog, a number of sessions ago to help these communities with their infrastructure needs.

And out there in rural North Dakota and where I live here in Burleigh County, also has a lot of needs to fix these roads.

First time in about 20 some years, I think that we've raised the gas tax up 3 cents.

And again, this money will just be dedicated towards that.

I was interested to note 40% or so of the people that pay gas tax are out-staters as they drive through the state.

So they will also help fund these needs that we have.

- But again, they do that because they use the roads.

- Correct, yep.

They do use the roads.

And in that bill, there's also some fees for electrical cars, those sorts of things, EV cars because they don't buy gas.

But yet, they use the roads.

So there's some fees on there to attach to.

- And that's been a conundrum since, you know, EV vehicles became a thing because they do not buy gas.

They don't pay a gas tax.

How do you charge it?

- Right, exactly.

So the bill addresses a lot of those concerns.

- I also have to ask you about a bill that you were shepherding too, it's about getting rid of Chinese drones that the state owns and then getting the system to help advantis with the, you wanna call it, next area radar or next area flight?

- [Mike] Yeah, yep.

- A tracking radar, I think.

- Yeah, so you're talking about the Chinese replacement program, it was in House Bill 1038.

That all came about some conversations they had about a year ago.

Long story short, found out that the state owns about 88% of the state inventory is made of Chinese drones by one manufacturer, DJI, who has been found to be a security risk by the Department of Homeland Security, Department of Defense, and the FBI.

And I know Congress is taking a look at it.

I think there's some legislation that's gonna be coming up here in a number of months.

So anyways, we passed that through the house, $15 million to replace these drones with drones from U.S. made or friendly countries.

And to make sure, they were the same capabilities for the agencies in higher-ed that the state owns.

Passed through the house, 8924, swimmingly has the support of the public, support of the governor, unfortunately went over to the Senate and it was taken out of the bill, was defeated, but the other half of the bill had $11 million for the FAA radar.

That passed and that will now allow North Dakota to be the only state in the country to have access to the FAA radar data, that being important because we have the vantis system, as you said, it's the radar system for drones and really one of a kind in the country and one of a kind in the world.

So by this vantis system having the access to FAA radar data will actually enhance that system even more.

There's a number of entities that are signing onto the program.

I know Michigan is the first one on.

They're talking to a number of other states and other entities that wanna do it.

I met with officials a year or two ago from the European Union that are watching this program very closely and are very interested in vantis.

So very important that that 11 million pass and I was happy to see that.

- Not to put too fine a point on it.

This will enable more beyond visual line of sight.

- Correct, yep.

And we're one of the few states, or the only state with the beyond visual line of sight.

The UAS industry in North Dakota is booming and we really are the leader in the country right now.

We have a test site out there on one of the federal test sites.

The environment out there with the UAS industry is just really growing and this vantis system just helps keep us leading the pack.

- One of the arguments I heard about, you know, putting this in for the vantis system is that, you know, UND is trying to expand its program for air traffic controllers, this is gonna help perhaps as well.

- Yeah, yeah.

And again, it helps the system.

I mean, there might be job opportunities for the graduates as they come out and do that, so.

I just wanted to touch base on the drone program.

As you and I know, nothing is gone at the capitol until we sine die until we leave.

So I would just say, stay tuned for that.

- So this is gonna be conference committee maybe or maybe something else.

- Well, yeah.

You know how those things happen.

- [Dave] Yes, I do.

- Yep.

- We've been on that circuit a few times.

- Yep.

- So you're chairman of the Appropriations Energy Environment Committee, correct?

- The Education Environment - Education Education.

- Yep, yep.

- I'm sorry.

So you are going to have K-12 and you're going to have higher education.

Have you had K-12?

- We have K 12 right now.

- Right now.

- Actually, and we're hoping to move that outta the committee here in the next couple days.

And we have a couple other policy bills with money that affect the K-12 budget, so that's kind of what's holding us up right now.

But K-12 was one of the bigger ones that we handle and things are moving along pretty well with that one.

- So that should be on the floor fairly soon.

- I would think, Dave, early next week.

- Okay.

- Yep.

- So thumbnail on that one real quick.

- Well, right now, we're looking at a two and two increase per pupil.

Again, there's some other legislation that may bump that up a little bit higher.

We have some pieces in there.

I know there's a lot of talk on the free meal program and we have money in for that.

And that is for people that qualify, they're up to 200% of poverty.

So that's anybody with an income in the 75 upper 70s range who would do that.

And that program was very popular last session after we did it.

So it helped a lot of people and a lot of kids.

- But what about the bill that would have free meals for children both breakfast and lunch?

- Yeah, I think there's a couple bills coming with that $140 million price tag, those sorts of things.

Well, we did in the Department of Education's budget, I think that was 4.5 million.

Those other ones are 140 million plus price tag.

That's for everybody.

And I think the debate's gonna be, well, should some millionaire's kid get free lunch?

And so those are the kind of things we're gonna have to talk about.

You know, there's this educational savings account idea, these bills coming up.

With these ESAs, the bills I've seen, also will allow families to put money aside with state matching money and they could also use that money to pay for their meals too.

It'd be a whole laundry list of things they could use in the ESA.

So that is not as cut and dried as everybody thinks.

We've been getting a lot of emails on it, that's for sure.

But that discussion will be coming up here too, within a week.

- How do you feel about ESAs, generally?

- I like ESAs.

I think it's a great way for a family to save for their kids, you know, and the state will match up to a certain amount and they can again, use it for free meals.

They could use it for sporting activities, all these fees that as a parent, and I am a parent of three children, you have a lot of these things through school, you need to pay.

And to have that with state matching money, I think really helps these families with some of these additional costs when it comes to schooling.

- So higher education's gonna be in your section after crossover.

- Correct, yep, yeah.

- Have you been watching that?

- Not really.

I made not too much of it.

I've talked to a couple people on the side, you know, last session, we had a two year freeze on tuition.

I don't think that's in there this session.

I don't have a problem with that.

We were a little worried about the Minnesota Promise thing and I don't think the nightmare scenario planned out like we figured it would.

But there's some serious challenges there, Dave.

We have some schools that are really growing, but there's some formula issues with higher-ed that some of the schools really took a hit.

I know NDSU took a hit, BSC, some other schools took a financial hit, quite frankly, at no fault of their own, just the way the formula works out.

So those are issues we're gonna have to take a look at going forward.

- Yeah, I've seen a couple of bills that are out there for adjusting that formula.

- [Mike] Yes, yep, yep.

- So a lot of play in the second half of the session coming up.

- Yeah, you know, the second half is really where rubber meets the road, right?

Because whoever has that budget, that is what's gonna be going in the conference season.

So I suspect, there'll be a lot of asks and there's always a lot of good reasons for it.

But, you know, we have to make these tough decisions sometime and stay within our budgets.

So I gotta say though, the first half with the budgets coming out of the house appropriations, it's probably some of the tightest budgets I've seen in a long time up there.

Very few FTEs, staying very close to the governor's budget.

In fact, I think a lot of 'em are below the previous governor and pretty close to Governor Armstrong's budget.

You know, it's been my experience in the last 16 years when we and a props come out, we usually spend a heck of a lot more than a governor has proposed.

And this time around, we're pretty darn close to the governor.

And I think in some cases, probably even under.

- Maybe the governor set the tone when he appeared before the full appropriations committees and said, "I'm cutting the number of proposed FTEs."

And he was really talking about a leaner budget than what Governor Bergman proposed.

- Yeah, and it's led by the governor and led by both leaders in the chambers too.

And it's been enforced to us that hey, let's just keep it lean and you know, if some areas need some additional funding, we'll do it, just be a little bit more smarter about it, so.

- Okay, and we'll watch that.

- Yes, yep.

- One thing, the pay plan is three and three for state of employees.

- Correct.

- State employees have said, maybe they like to see more than a three and three, what do you think?

- Well, it's gonna start off with three and three and again, and you and I have had this conversation in the past sessions too, that all comes down to the conference season time and let's see where we're at revenue wise.

You know, after a crossover, we'll have an update to our revenue pitcher and if the revenue pitcher is brighter than we expected, a lot of times, those things will maybe creep up a little bit.

Maybe, we can give more and do those sorts of things.

So I've told several of the agencies who have kind of a wishlist of things, "Hey, let's wait to see what the revenue picture is and maybe we might have some more room to work with you."

And I'm confident, I'm hoping the revenue picture is up.

We're financially, Dave, I think, the state's as strong as we've ever been financially.

We have a lot of money out there for the rainy day stuff.

We have a lot of money in different funds as far as school construction, roads, infrastructure, those sorts of things.

So I think North Dakota financially is set up really strong and the economy's well.

So I'm crossing my fingers that that revenue picture comes in good.

- So the idea of the bucket system, that was Jeff Dozier's idea, actually turned out pretty well.

- Yeah, yep, yep.

And there's buckets all over now thanks to Jeff, everybody's got a bucket someplace.

But no, it's turned out really good so far.

- One big issue, I think you're still dealing with is water.

And tell me about where you're at on water projects.

- Well, we just and my committee just before I got here today, we just moved the water budget out into the full appropriations.

It's a little over $900 million.

Water budget is funded totally off of oil revenue, the state's oil revenue.

So it's all special fund, no general fund, no tax dollars.

But talking about needs in our discussions today, next 10 to 15 years, we have roughly about $5.1 billion dollars of needs for water projects.

We have to get fresh, clean water to our communities.

So some of the big projects we're looking at the funding and we are, is moving water from the Missouri River out to Red River Valley.

That's a big thing.

They need water out there, not only for the growth of the residents, but also for industry coming in town.

And we need those sorts of things.

Minot needs additional funding need up there for the flood that they had endured back in '11.

Bismarck is now on the list for flood protection in South Bismarck.

And that's a combination of state and federal like most of these projects are.

But by doing the South Bismarck flood protection, we save over a thousand structures from having to pay flood insurance.

And that'll help the residents down there a lot once we do that.

So provided we pass the budget, we'll be starting next biennium and it's about a four or five year project, so we'll be funding there for that.

- Let's talk about the Red River Valley Water Supply project.

Are there hangups still out there?

- No hangups.

You know, there was a lot of discussion at beginning, what should we do?

Should we bond for this?

Should we just pay for the cash?

You know, they was thinking if we bond for this, it frees up more money for more of the rural projects, those sorts of things.

But the bonding talk right now isn't really happening.

So we went down the road of just paying for it.

Again, this is special fund day, this is already in their budget.

So we just went ahead and said, "Hey, we just going ahead and fund this right now."

While they have the money.

- And of course, there's a Southwest Pipeline project, they're looking at expansion.

You've got NAS in the northwest part, they're looking at expansion.

- Yep, and all those projects have seen increased funding through this bill that we did today.

So we have also a $200 million line of credit in the bill.

So for some of these projects, they don't need all the money right away.

They need a little bit in the beginning because some of it seeps into the next biennium 'cause these are long projects, these water projects don't get done in just a year or two.

A lot of these things go on for many, many years.

- So the line of credit's at the bank, correct.

- Bank of North Dakota for $200 million.

And that's just another way to finance these.

- And we talked about how valuable the bank is because you can do that.

- You can.

And I think when you look at these budgets, you're gonna see a line of credit in a lot of the budgets now.

We've been using that as a tool and I think you gotta give credit to Representative Swantech, him being a banker kind of open our eyes up to that last session.

And we're using it a lot in other things, just to have that line of credit there in case we need it and it buys us time.

It's just good money management having a line of credit in there.

And again, that comes from an experienced banker and I think it's a great tool to use.

- Now, you did mention bonding.

What is in a bonding proposal, if there is anything right now?

- Well, right now, I'm not aware of a bonding proposal.

I mean, there's a lot of ideas for bonding proposals right now.

I think personally, there might be some talk again in the second half.

Again, depending on the revenue picture.

Let's see where we're at.

Some of the things, it be nice to see the bonding to come in and just get some of this stuff off the table.

But that's not really being discussed right now in the first half.

- And I'm hearing some concerns that the rate isn't looking good right now.

- Yeah, the rates are there.

You know, one thing we do have though, we do have a funding source, it would be through legacy earnings as we know.

And you know, the earnings are $600, $700 million as we speak.

And you know, just think about it, Dave, in a couple years, two or three more sessions, there'll be close to a billion dollars of earnings coming off a legacy fund.

And that's really a nice tool to have.

And the way we're set up right now, a big chunk of that does go back into the fund.

But we can use the remaining for things like bonding, if we need to do bonding, so we have a revenue source to pay those bonds.

- Yeah, the legacy fund, we all know about it, but it really does help the bottom line a lot.

- Absolutely.

And you know, right now, it's well over $11 billion in gaining steam.

I think there's anywhere between 60 to 80 million a month goes in there.

So it keeps growing.

Obviously, it's market sensitive if the markets are doing halfway well, that'll even grow that much more.

So it's a nice tool to have something that a lot of states don't have.

That is a revenue generator to help fund these things 'cause right now, it's funding property tax relief, it's funding roads, it's funding schools, it's funding a lot of things right now.

And down the road, it's gonna even help us that much more.

- And we should mention this, this is not spending any of the principle, this is just the earnings?

- No, this is just the earnings.

And again, the earnings that are thrown off of there, there's a portion of that we put back into the principle.

So it's not like we're spending all the earnings.

So we take a portion of that and put it back in, but then we use the remainder for programs.

And these are long-term programs, Dave, that are needed, these are projects that are needed.

A lot of 'em are infrastructure-based.

- Now, there's been some discussion already about a new state hospital.

This has been talked about for years.

And there's the $300 million proposal to build a new state hospital in Jamestown.

Senator Mathern has this thing to do, and less at the state hospital and do all these regional centers.

You haven't got that bill yet, have you?

- No, we haven't.

And you know, if there is gonna be a bonding bill, I think that's where the bonding bill would be.

Would be in the state hospital.

And I know representative, John Nelson in the house is deeply involved in that.

So those things are ongoing.

That's a pretty big complicated project.

But quite frankly, we need to do something out there.

I've never been through it, but I've heard a lot of horror stories about the condition it's in and it just needs to be updated.

So I think if there was a place to do bonding, that is definitely, one project we should do.

- We could do that there.

- Yeah, definitely.

- Yeah.

What about prisons though?

- Well, we had a lot of discussions.

We actually had a bill for the props here the other day about prisons, about making some monies available to local political subs for remodeling or building prisons.

So we're discussing that right now.

There's a lot of needs when it comes to corrections, not only in the state level, but especially on the local level for the cities and counties and their prisons.

And the problem is, is finding people to run the prisons, right?

The problem is that we define enough law enforcement officers.

So those are all things that all goes hand in hand, so.

But we are having those discussions.

You know, those are things that a lot of people don't think about, but these prisons are getting full and need to be updated too.

- So that also begs the question, does there need to be more services available to deal with addiction so people are not repeat offenders?

- Yeah, we've seen some of those money bills with that very thing with mental health counseling for the prisoners and those sorts of things.

I think there's some programs already in place, but some of the bills we've seen will just enhance those even that much more.

and hopefully, address the problem.

It's an ongoing problem that's gonna be around for a long time.

- Now, you talked about workforce and that remains a pretty big issue for North Dakota.

- It does.

And you know, we're trying to do things such as, you know, incentivize, coming up with mentorship programs, those sorts of things that we're seeing in other budgets and there's no shortage of any ideas.

You know, last session that was the buzzword was workforce.

And let's face it, ever since the boom in 1213, that's been our biggest challenge.

But we're not the only state.

States all across the country are fighting us.

- Yes, everybody is looking for talent.

Everybody's trying to attract talent as much as they can.

- Yep.

- There was the bill that I think got killed in the house and that was the idea of ending the legal immigration part of commerce.

- Yeah, yeah.

I know some industries are using legal immigration to backfill their workforce.

And you know, it's not just as far as, the money and the job condition, but also, living conditions.

North Dakota's got a great tax base.

We got a great quality of life.

I know some people are bringing in legal immigrants to help, you know, the farmers do it a lot with the South Africans that come in and it helps the workforce and they're happy to be here and happy to take part in our way of life and to do that.

And let's face it, this country was built on immigrants and if somebody wants to move this country and work their tail off and help us move forward, well, I'm all for it.

- And your committee was meeting, you know, to talk about some of the issues, you were talking about some tourism things and some park things.

- Yeah, we had the park budget the other day and we're looking at some more workforce there.

The Pembina Gorge, we put quite a bit of funding in their last session and that is just such a jewel up there.

And our park system has done fantastic.

The number of visits, they're busy all year.

They've created more cabins and more experiences and my hats go off to them.

They do a wonderful job and they're booming right now.

Our tourism is going really quite well and we need to keep that ball moving.

- We have about a minute left.

So there are a couple things I just want to ask you about, 80 mile per hour speed limit, yes or no?

- I was a no on that.

I don't know, I just maybe seen too many accidents in my life through my line of work, so I was a no.

- I understand that.

And how about raising the fines for driving through construction zones?

- Well, I think we should raise not only those, but a lot of our driving fines, a lot of those fines have not been touched for decades.

You get a ticket, our next door neighbor, it might be $150, you get a ticket here, it's 25 bucks and that's not much of a deterrent these days.

- There was a great testimony about somebody who said you've worked in the Bachan area.

- Yeah.

- And said they just laugh.

- Yeah, they'll pay the 25.

Yep.

- Yeah.

So here's the most important question.

We're going to crossover, when sine die?

- I'm gonna stick to my number as you ask me every time, 75.

- 75.

- And I think this time, there's a real chance we're gonna get there.

I do not see any big issue, I should knock on wood.

- [Dave] Knock on wood.

- But nothing right now that I see that's gonna really trip us up.

So I feel pretty confident, 75 or darn close.

- Well, Representative Nathe, thank you, it's always good to talk to you.

- Thank you, I enjoyed it.

- Our guest Representative Mike Nathe of Bismarck for Prairie Public.

I'm Dave Thompson.

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