(mid-tempo instrumental music) - This is "North Dakota Legislative Review" on Prairie Public.

I'm Dave Thompson.

Thanks for joining us.

Our guest on the review this week is State Senator Brad Bekkedahl of Williston.

He's a Republican.

Also chairs the Senate Appropriations Committee.

Senator, thanks for being here.

- David, thank you for the opportunity.

I always appreciate it.

- Well, let's talk about what's, you know, we're getting toward the end of the session.

From your perspective, what are the main sticking points at this point?

- Well, Dave, we've been focused on balancing the budget by cutting some of the requests we've had to get to living within our means.

And we're currently right now we're about, the report I got this morning, about $45 million overspent in the general fund and about $92 million overspent in the SIF fund.

So we're close.

To put that in perspective, we have beginning balance of general fund dollars to work with is just under $6.6 billion.

Our SIF account, when we came in it was just under 1.6 billion.

So that's the numbers we had to work with in our forecast to spending authority.

To put it even to a more perspective of where we've been and where we are today, when we came into this session, there were enough bills introduced that the spending totaled almost $9 billion more than we had.

- [Dave] More than you had, yes.

- We have now brought that down to within $50 million and $100 million on the other one so.

- No small feat at that point?

- No, it's been a real challenge.

Credit to the chambers and the appropriators for working so hard to bring that into balance.

We're still not there yet, but we have, I figure about 10 major budget bills to go through.

Mostly agency budget bills to get through right now that account for the majority of the spending we need to take out if we do any at this point.

- Okay, so there are some decisions yet to be made?

- [Brad] There are, yeah.

- Let me just ask you about, you're also on the Conference Committee for the property tax relief?

- [Brad] I am, yes.

- Now have you met?

- We've met I think three, maybe four times.

We have another meeting this afternoon after this actually, and we had a list of about 14 different areas of the build that we needed to talk about, do we agree or not agree between the confrere and I think we've narrowed that list down to about four key points.

10 that we seemingly agree on at this point, and four that we need to continue working on.

So we're gonna be working on one of those this afternoon.

- What do you think that those four points are?

- Well, one of them is that people don't like the terminology of skin in the game, but really what we're referencing there is that at some point the taxpayers are gonna have some property tax no matter what we do.

They're gonna have some special assessments that are exempted from the relief.

We are now taking into consideration allowing voter approved levies to be included in the relief, which that didn't in the original bill, but we still have a 25% local property tax share for the property owner.

We've set a limit in the bill for a $500 minimum that you would actually get to any property and the maximum would be $1,650 per year in this effort.

So the 25%, if you had to, if you were in a larger city and you had a tax obligation of $2,200 on your property tax, you would get the full $1,650 tax relief.

- Okay, so it's based on valuation?

- Correct valuation and then the tax levies through the mills.

But my house, for example, in Williston is about $2,200 taxes on it.

Then, at the current rate, I would qualify for the entire 1650.

Anything above that, if you're in the three, $4,000 tax bracket, you would qualify for the full 1650 as well.

If you're in a smaller home, the least amount you can get is 500.

But for some people, they're gonna see their taxes almost wiped out by this 1,650.

- What about caps on levies?

- So the caps right now are at 3% for political subdivisions on the levies.

We think that's reasonable.

We'll come back in two years and see how that functioned.

If we need to make adjustments, we'd be willing to do that at that time.

- But then again, you have the in there that if a city or a county or subdivision wants to raise taxes, they can go to voters.

- Yeah, there's voter opportunities, but they have to be held at the general election.

They're not a special election issue like they were before, so.

- General election to get more people voting, I assume?

- Well, that's the thing.

So I've been a Finance Commissioner Williston now for 30 years on the City Commission, and what I've learned over the years is it's probably better to have a general electorate coming to vote on your issue than a special, because the special election, not many people turn out.

If you really want to reflect the sense of the community or the electorate do it at a general election.

- Are there any percentages, like they have to get 60% of the vote or is it just a simple majority?

- It's a simple majority.

It's a 50% plus one.

- And I'm going to ask you this question because I've been hearing it from some people in education.

Why is just a simple majority if you want to build a school building and bond for it you gotta get 60% on it?

- Yeah, so that goes back historically a long time in North Dakota law.

It's always been that all the general obligation bond levies have been at a 60% threshold.

I can't tell you why that is.

It's frustrating to many people that they pass a bond issue, they get 57% on a bond issue for passage, which is a majority, but then the minority 43% control it and kill the effort so.

We've tried to change that in the past.

I haven't been out, I've not been part of those attempts, but I know there's been attempts to change that.

It's not been successful.

I think the feeling is if you're going to place additional government obligation bonds on the public's property tax levies, it should be more than just a simple majority saying we're gonna do this.

- Okay.

That's been the feeling for a number of years from legislators I've talked to.

So one other major issue that I see that there's still some disagreement on is over the construction of a new state hospital.

So what is your senate position so far?

- So what we did in the Senate is we took the hospital project funding out of the DHHS budget, which is Department of Health and Human Services budget, and we put it into the OMB budget, the Office of Management Budget category.

And we did that because OMB actually has people with construction management expertise already within the department.

They're the ones that take care of state facilities, the maintenance, the deferred maintenance needs, as well as the construction needs.

So Department of Health and Human Services has nobody with those expertise levels.

So we moved it into the OMB budget with the thought that they would probably do a better job of managing the construction.

DHHS probably did a better job of planning and designing the project, but we moved it to OMB for that reason.

So that has to be worked out because on the House version of the DHHS budget, they still have the funding in there for the hospital.

We've moved it into the OMB budget so that's gotta be reconciled.

And both those budgets have not come to conference yet.

- Yeah, there's still a lot of work to be done on those.

- [Brad] There is.

- The Governor had proposed 300 million for it.

The House position was 330 million and at one point, I think the Senate was at 285.

- Yeah, and the Senate is currently at 285.

And really what that's a function of is how many beds are you gonna put into the facility.

I think the $330 million figure has a higher number of beds to it.

The 300 million that the Governor's recommending has the original number of beds.

The House added beds actually, and that's where they got to 330.

The Senate's position is that we think you can build it, even for the beds that the Governor's recommending, for less.

And that's why we put 285 and that will be a point of discussion in conference as well.

- Now, has the word bonding come up in discussions?

- Many times.

The House is pretty fond of bonding this session.

The Senate, we've been staying away from bonding because our sense is that we have, when we came into the session with about $1.6 billion in the SIF fund and about a $1.6 billion surplus in the general fund, that's over $3 billion.

Our feeling was we can live within our means without having to borrow money to do things.

We can spend the cash that we have and do the projects that are necessary.

I think the House has other spending priorities where they wanna bond to free up some of the money we have for other spending priorities and that's what we do.

The Senate sets their chamber priorities, the House sets their priorities, and we get into conference and work 'em out.

- Yeah, at least the conference committee just right now, the discussion's pretty friendly, I assume, right.

- It is, it is.

And it stays that way for the most part, I would think.

But again, the Senate just feels like we had the money to do these things.

We should prioritize the spending on the projects that have the greatest need and spend the money we have versus borrowing money and then allowing that spending to go to other things that might not be as a high priority as that project.

- Well, you say you came in to the session with 1.6 billion, right?

- [Brad] Correct.

- And now you're trying to get outta this session with 75 million.

- [Brad] Correct.

- Yeah, it's a kind of a different dynamic.

- The target we've set between the leadership on the both chambers is that we would like to see $75 million in carry over in the general fund to start the next biennium, and we'd like to see about 200 million in the SIF fund.

To do that, we have to make cuts of about $311 million more in both of those areas so.

311 million gives us the cushions that we think we need in both the SIF fund and the general fund going forward.

- Are there enough wants instead of needs that you might be able to do that or is that a discussion that still needs to be had?

- It does, and you know, I've always said that we should be funding wants, not needs.

And my philosophy is pretty simple.

We should fund the state priorities first because we have that obligation.

This is the state of North Dakota.

Then we should look at funding the needs, not versus the wants at the state level.

And then I think we can look at the local political subdivisions in other areas and what are their needs, but there's also a lot of wants there.

So I kind of boil it, personally, I boil it down to when I look at these projects, if I would write my own personal check to do that, I'm probably comfortable saying the state should do it too.

But if I look at it and my assessment is, I don't think I would do that, I'm probably gonna take that angle on the state spending as well.

So that's just a personal preference that I have.

And I think I'm more conservative in my spending, so that's probably- - [Dave] Okay.

- From the state perspective, a good thing.

But then I would also tell you that when you talk about wants and needs, that discussion is really a matter of perspective.

I would look at what you wanna do as a want and you'd probably look at it as a need.

So that's the difference in how we get to this, so.

- Sure.

Well, I'll ask this question, get it outta the way.

Prairie Public has been a kind of a subject of discussion.

It was zeroed out, you got it back to 800,000, but the ask from the Governor was two point, was it 2.8 or 2.2 or something like that?

- Yeah, it was a much higher number.

So when we looked at it, the House had actually passed a bill that took it out and then required us not to put any funding back in.

- [Dave] Right, right.

- On the Senate side, we killed that bill and we said, "No, we need to look at it."

And what we did was we agreed that there are certain infrastructure projects that Prairie Public, that is essential to Prairie Public that need to move forward.

And by the way, some of those tower infrastructures we use in our state emergency systems as well.

So we thought it appropriate to put some funding in to assist with those infrastructure build projects.

And so we took the number of, I believe it was about 1.6 billion, that was, 1.6 million, was a request for infrastructure projects.

We took and halved it and said, "We'll give 800,000 for those," for the state share, but we did not fund the ongoing other operations at 1.2 million.

So the request from the Governor at about 2.8 million, we in the Senate have put funding in for 800,000.

- Is there a possibility that might go up or?

- It depends on where the House conferees are on that, because we've passed that already so, they have to look at it in Conference Committee.

- Okay, still some work to be done perhaps, yeah.

I wanted to ask you about another thing.

There's the budget for prisons, you know, the Corrections Department has prison projects that are coming up.

How do you feel about those?

- Well, we put the necessary funding into complete the women's prison.

So last session we started that with some funding, the majority of the funding actually last session.

And we brought another appropriation this session to complete that project.

So that will get done with the appropriations we've put out there right now.

There's a need for the Missouri River Correctional Center.

The Governor's recommendations from both administrations has recommended about a 600 bed facility that they want to have built in Bismarck or Mandan.

And we have agreed to fund some of the preliminary design and engineering study on that, but not any funding for construction yet.

- Okay, so that's to be- - So as you know, we are overcrowded in our prison systems at the state penitentiary in Bismarck.

We've been overcrowded in the new women's prison.

This new facility should take care of that.

To take care of the overload that we have, or the overcapacity issue, we're currently using some county jails under contract.

And I know there's two facilities, Burleigh County and Grand Forks, that the governor's been in discussions about using extra space that they have as well.

So you'll see appropriations added to take care of the lease requirements and expenditures needed to staff those areas for some of the overflow.

But the need is now, the space is there now, we think it's best to go ahead and do that and then plan for the Missouri River River Correctional Center after that, so.

- How about, I know James River has been talked about in and out, but that's not part of this discussion at this point?

- Not that I've heard, no.

There's buildings on the campus, there currently could be coming into discussion if and after a new state hospital building is built, but that's not part of the discussions right now.

- Yeah, and I think, not to put to a fine point about the state hospital, I understand the idea, you know, they were co-located when they first first established the James River Correctional Center.

Now they're talking about putting some distance from the way I understand it.

- That's correct, yeah.

So it's separate facility areas that, the facilities that would be used for correctionals would not be attached to the state hospital if it's built as a new building.

- I wanna go to another subject.

And you had announced plans for some housing incentive funding.

Where does that stand now?

- So the Governor asked me to put in a bill that he had requested for $50 million.

Governor Burgum had a $50 million request that he had for his Hope Fund for incentivizing new home construction.

And Governor Armstrong turned it into The Home Plan, but still for a $50 million appropriation.

We passed that outta the Senate and sent it to the House.

The House has since revised that down to $35 million.

And so that's going to go to Conference Committee.

And there was basically three areas of allocations for funding based on populations for cities and small towns, middle towns, and larger towns.

And when they took it down to 35 million, they changed the numbers within, correspondingly, within those three categories as well.

So everybody is still covered statewide, no matter how big your community is in that project funding.

But it's from 50 million to 35 right now.

- Are you satisfied with 35?

- Well, I would support the Governor's 50 million, but we're in a position right now where we have to balance a budget so, everybody has to give a little bit at this point.

- Yeah, well you talked about 50 million and that brought up the other subject, you know, the Theodore Roosevelt Library.

The House has passed a $50 million thing to start an endowment fund.

- [Brad] Right.

- I understand that the Senate was not aware that was coming.

- Yeah, it was a bit of a surprise.

The Governor obviously worked with the House on that, and that was where he wanted to introduce the concept.

But the challenge is, you know, when the library was first brought by the previous administration, the ask was for $50 million in endowment that would spur the private donations to get the building constructed.

And so we agreed to that.

We put the 50 million in endowment.

It's still, by the way, state held funds, but the interest earnings that accrue can be used for some expenses ongoing for the maintenance of the museum.

That was the intent.

We were told at that time that that was the need that we had to fund that would get the project going.

We also have done in the last session, a $70 million line of credit with the Bank of North Dakota, so they could start the construction by signing the bid packages.

And we put that out there.

They had not used any of that 70 million.

I'm told they may be at a point now where they're starting to have to use some, because the pledges for the project, were a five year pledge period.

Three to five year pledge period.

Well, obviously the five year pledges that aren't paid yet, we still have to pay the contractors.

So they may have to access some of that 70 million line of credit to do that.

Now what's changed is the House took that $70 million line of credit and they have obligated a continuing $20 million line of credit as a backstop if needed, and then $50 million into the endowment fund, which would take the state share of the endowment fund from 50 million to 100 million.

And they can't get any of the 50 million new money except for every dollar for dollar match from private funding.

So the 50 million new money would drive another 50 million of endowment.

The final number for the endowment would be 150 million.

And the thought process is that that would forever take care of the operations and maintenance of the library.

- And of course, you being in Western North Dakota, the Theodore Roosevelt Library is gonna probably help tourism in Western North Dakota too.

- It's not just a huge project in North Dakota, but, in western North Dakota, but it is probably the largest tourism project we have in North Dakota on total already.

So this is just gonna expand that opportunity.

- Since I'm all over on a lot of budget stuff, I was talking to Senator Fargo regarding a water budget, and that was interesting and that whole discussion about the stripper wells started coming up so.

- Yeah, so we did run into an issue with that.

So the Water Resources Trust fund is solely funded by the 5% oil extraction tax that we have.

What's happening is we, there were laws passed many sessions ago that once a well hit what is called stripper well status, so a well comes in, produces a lot of oil early on, and then it goes into a long-term maintenance mode at a very low production rate.

That's called a stripper well status.

And once it gets into that status, the legislation that was passed many sessions ago, grants them a 0% extraction tax.

So as these wells age and get to their stripper well status, the more wells we drill, the more wells that age, the less money that comes into the fund, obviously, because you have some at 5% paying tax and some at zero.

Well, the blend of that becomes the effective tax rate.

Right now, that effective tax rate is about 4%, not 5%.

And it looks like, as the field ages in the Bakken Development, that percentage is just gonna continue to decline gradually over time.

That brings less money into the fund, less money for us to spend on water projects, and that's now hitting our considerations in spending.

- Yeah and Bakken wells are, they produce a lot of oil at the beginning, then natural gas takes over, oil goes down, and now you've got wells that are 35 hills.

- The history of the Bakken Three Forks Well Development is those wells will produce about 50% of their total recovery within the first three to five years, but then they'll stay stable at a much lower rate for the next 25 to 30 years.

So the key to granting the exemption to 0% was we didn't want the industry to shut down low producing wells that we could still get oil out of.

And that's why the incentive is there.

- Absolutely and now you've got other incentives that are pending.

I don't think that the final votes have been taken on it, but to do outside the Bakken Three Forks and to use new technologies such as enhanced oil recovery.

And there are ways that they're incentivizing the oil industry to do that.

- Yeah, so the idea is that we're very dependent on one formation right now, and nobody else is looking at any other formation.

So granting the exemptions that right now don't cost us anything, but for people to challenge the industry enough to go and say, "Is there another formation that could be the next Bakken?"

Let's put the resources into that by granting the exemption.

It makes sense to me.

And at some point, hopefully that bears fruit.

- And then, you know, we get production up and that's a good thing.

- Correct.

- So, you know, you also, we talked about water.

How much of that was the northwest area water supply NAS, and how was that gonna affect Williston?

- So the NAS Project is actually is a kind of a state owned project along with state, the Southwest Pipeline Project.

That's a state owned project.

That means the money we put in those resources to develop those projects is all state money.

The WAZ is Western area water, which services the Williston area, the county surrounding that area, that is an authority that manages that and it's not part of the state system.

So what happens is they come to the State Water Commission apply for grant funding at a 65%, 35% match for the projects they need to develop and expand that system.

Whereas NAS and Southwest, they get 100% state funding.

They don't have to rely on any match to do that.

But they also pay money back into the Water Resources Trust Fund from their rate structures from their users.

- And Southwest Water is expanding.

- It is.

- Or trying to expand.

- Yeah and a lot of it is tied into the expansion in the Medora area right now that we see with the library and other activities that are trying to expand the activities in that area and they need more water so, the Southwest Pipeline Project is now going with more pipe project out into that area.

And they have to actually, in the process of building another water treatment plant, to suffice that.

- Yes, I have talked to the Water Commission about that or the yeah, the Department of Water Quality or whatever it's called these days.

And yeah, their plans are going ahead.

They're gonna serve more customers and that'll be cash back in.

- And I think their water treatment plant project is about $100 million project.

So not, I mean, it's a sizable investment for that area.

- Quickly, the River Valley Water Supply Project that's still being funded, it's still being worked on.

- [Brad] Yep.

- Is there a concern about maybe lack of federal funds coming up?

- Well, I don't even know what federal funds have come into that project, to be honest with you.

I know there's been discussion at the federal level to try and get some funding for that project.

And in the change of administrations, I think that's all been put on hold to be honest with you.

But I know our congressional delegation is still working diligently to try and get some federal match into that project.

Right now, the state has committed to an amount about $870 million into that project.

We funded last session, we funded a large amount of that this session.

The House is asking us to fund, I believe, about 250 million in the Red River Valley Water supply.

Because of the loss of dollars, because of the extraction tax issue, the Senate, we took that down to 150 million.

That's gonna be a Conference Committee issue.

- Another Conference Committee.

We've got about a minute and a half left.

I wanted to ask you, there's an effort still to save some days in case you need to call yourselves back into session.

What do you think the possibility of that is?

- Well, originally we were targeting to be out of here by April 30th, which would be next Wednesday at day 73.

I think with the pace we're on right now, we're going to be beyond that.

Day 75 would be Friday.

I'd love to be out here by next Friday.

I think that might even be in peril just at the pace we're on right now because the House is still passing bills from the chamber that we still need to get into Conference Committee.

- That's right.

And we got a minute left.

Give your chance about coming back to deal with any particular federal funding issues.

- That's gonna be at the call of the Governor.

Obviously, he's the only one that can call a special session to do that.

I don't think no matter what bills, what number of days we save is gonna be enough to deal with that issue.

So it would be at the call of the Governor and I've just told people we have to do what we have available to us right now for the knowledge base we have.

If something changes the day after we leave, somebody else is gonna have to bring us back, so.

- Well, we've run out time.

Thank you for it.

And there's a lot to be decided yet, so.

- You'll get a lot more and better information from Chairman Vigesaa on next week.

- Okay.

Our guest day is the Chairman of the Senator Appropriations Committee, Senator Brad Beckett of Williston.

Thank you very much for being here.

- [Brad] Thank you, David.

- And for Prairie Public, I'm Dave Thompson.

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