(bright music) - This is "North Dakota Legislative Review" on Prairie Public.

I'm Dave Thompson.

Thanks for joining us.

Our guest today is the Senate Majority Leader, Senator Dave Hogue from Minot.

Senator, thanks for being here.

- Well, thank you for having me, David.

- You've got an interesting session.

And a lot of the discussion so far has been about taxes, especially property taxes.

Where are you at with property taxes now?

- Well, in terms of where I'm at, I think I've tried to be as clear and transparent as I could.

I support property tax reform and relief at the same time.

On the relief side, you know, I feel like we have a budget surplus that we can afford to provide another $500 million of tax relief to the citizens of North Dakota.

We think it's gonna be focused on the primary residence again, and I suspect we're gonna double that.

So it'll be approximately $1,000 per primary residence.

In terms of the reform, we're gonna have to limit the taxes, the amount that the political subdivisions can levy based on a percentage of what they've levied in previous tax years.

- So it's not necessarily a hard and fast 3% cap at this point?

- No, I wouldn't say it is.

Because different political subdivisions have an ability, or I suppose an inability to absorb that percentage increase, whether it's 3%, 4%, 5%, or 2% or 1%.

So we're gonna look at that and we're gonna try to use a scalpel instead of a more blunt instrument and say, all right, there are certain political subdivisions that don't have as much dependence on property tax as a overall part of their revenue pie.

And so they can probably adapt to a cap that's less than 3%.

But there are political subdivisions cannot adapt to, you know, to that 3%.

So I'm gonna try to look at that, and I think we'll all look at that and say, "Okay, where can each political subdivision handle caps in terms of percentages?"

- Yeah, larger counties have the opportunity for local sales taxes and some other revenues.

But say you're in a Slope County, you don't have any other option.

- Right, right, yeah.

And it's primarily the rural political subdivisions have less flexibility to adapt to, let's say it's a 3% cap.

Whereas our larger cities, as an example, they tend to rely on property tax revenue as a much smaller portion of their overall revenue.

I mean, they have user fees, they have intergovernmental fees, which is fees that are coming from the state, from various sources.

And so it's, you know, we have like 168 school districts, we have 53 counties, and all of 'em are different in terms of their ability to adjust.

- So that's why there needs to be some wiggle room at least.

- Correct.

Yeah, I would agree with that.

- Speaking of tax policy, early on in pre-interviews, I was getting the feeling that the income tax probably is off the table.

Is that still true?

- Well, when you mean off the table-- - Meaning reduce it to zero, possibly.

- No, that is off the table, I would say that.

There's no consensus, I'm not aware of any proposal that would do that.

Now, as a veteran of the legislature, you know that between the House and the Senate, there's always been a, not a tug of war, but, you know, the House has tended to focus more on income tax relief, the Senate has focused more on property tax relief.

And so we had that debate last session and we kind of balanced between the two of them.

And what's different, I would say, about this session is there is overwhelming consensus that we need to focus on property tax relief.

- I'm gonna switch gears for a second, because I was at the hearing where you testified on your proposal for a study of nuclear power.

- Correct.

- And that's really interesting.

You chaired an interim committee that looked at that.

And there is a rekindled interest in nuclear power, I would assume.

- Yeah, I think that's absolutely true.

And it's true across the entire United States and the world.

People are realizing, from the North Dakota perspective, I always ask people, "Well, tell me when the war on coal will end, and tell me what the outcome will be.

Because when you tell me that, I will know whether we'll need alternative sources of energy."

But you know, the reason that nuclear is more widely accepted now is the technology is rapidly changing.

There are these small modular reactors where you can put up a reactor and permit it in a much shorter period of time and, you know, do 100 to 200 megawatts with one of the small reactors.

There's an incredible and I would say intense interest in the large technology companies, the Amazon, Googles, they want nuclear energy, 'cause they see it as a way to satisfy their strong demand for electrical energy because of AI and because of data centers.

The data centers are really driving the growth demand for electric energy.

And you know, I've seen projections that data centers and AI will consume 25% of all of our electrical production in less than 15 years.

That's how much demand they have for electrical energy.

So there's a huge interest in developing more sources of what, you know, some people call clean electrical energy, of which, of course, nuclear fits into that category.

- The only issue though is what happens to the spent rods, to the fuel that needs to be-- - Yeah.

And that problem still has to be solved.

But again, the technology is, they're not even using the long rods anymore.

So Congress has to solve that problem of long-term storage of nuclear spent fuel.

But gosh, there are just so many exciting innovations out there with nuclear energy that I think it would be incredibly shortsighted for North Dakota just to say, "Yeah, you know, we have access to abundant cheap coal, abundant natural gas.

Let's not even consider nuclear."

That's why I'm pushing that forward, because I think when you look at the overwhelming increase of demand for energy, northwest part of the state, the demand for electric energy went, it doubled in 10 years.

And we have folks in the distribution co-ops up there are saying it's gonna double again in the next 10 years.

You're like, okay, we do literally have to try to pursue all of the above.

- Now, North Dakota has nuclear uranium deposits.

Is this a way to tie into that too?

- Yeah, absolutely, absolutely.

I think, you know, when I look around the country, I look at, for example Wyoming.

It's a similar state.

They have an abundance of coal.

But they have a nuclear power project going on there called TerraPower, where they recognize, I think just like we do, that, you know, there are federal pressures and federal regulations that are pushing hard on coal and making it more expensive to generate electricity using coal.

And so, you know, they're out there leading the charge as well to find alternative sources of energy.

Not that they don't support their coal energy, not that they don't recognize that it's, you know, it's still the most affordable way to generate electricity.

But, you know, you gotta look out beyond two or years.

- Speaking of energy, what's your feeling about carbon capture?

- I think it's a necessary thing for North Dakota.

It's not only a nice thing, it's a necessary thing.

I have tried to drive our dependence off energy and gas revenue for state revenues.

And it's hard to do.

And the concerning thing for me is, you know, we're already well over 50% of our revenues come from the oil and gas taxes.

And so how do you try to get a little more diversity?

It is hard.

But one of the things that carbon sequestration or using carbon to bring into North Dakota is it creates the possibility that we could produce more oil.

And you know, everybody has their projections on how much that would be.

But the bottom line is the federal government is incenting the sequestration of it.

They're also, with the technology, there's a possibility that it could be used to enhance oil recovery in our Bakken and in our old legacy wells as well.

And so, you know, if over 50% of your revenues comes from that industry, you're always interested in how you can enhance that production.

And CO2 is one way to do it.

- Of course, there are other projects with CO2.

I think it's Three Affiliated has that project for a big greenhouse.

- Mhm, yes.

- [Dave Thompson] So there are other ways to use it.

- Yes.

Well, and from my perspective, I just don't wanna see our state policy be so dependent on the federal subsidies that are being given to those who just sequester it below ground.

'Cause from a North Dakota perspective, you know, we don't know how long that's gonna continue.

We know that, you know, at $85 a ton, that's attractive to a lot of members of the industry.

- And of course natural gas, that's been discussed for a number of years.

But with the WBI extension, the new pipeline, that's probably a bright spot because that will help the oil production as well.

- Yeah, absolutely.

Well, as you know, Dave, as the Bakken play matures, it produces an increasing proportion amount of natural gas relative to oil, which is not a good thing, because we don't have a place to put that natural gas.

And so when you mentioned that WBI project, that's an exciting ability to offload some of that gas.

I would tell you that probably the most exciting development in that effort to offload that gas is going on with Basin Electric, you know, because of the construction that they're undertaking to build electric generation using natural gas.

Their Pioneer Phase IV Project is so large that they said that could take up to 7% of the natural gas that's produced in the Bakken.

And that's just one project.

They've also got another project they just announced called Bison.

And that's, again, it's a $4 billion project to do the similar thing, which is to generate electricity using excess natural gas.

So very exciting for the overall productivity of the Bakken.

- Yeah, it helps the oil, it gets power out.

- Right.

- Then we have power from a number of sources, the all of the above strategy.

And nuclear would be a part of that too.

- Correct, yep.

- I have to ask you about Sentinel, the Sentinel Project in Minot.

- Okay.

- Is there anything the legislature can do or will do to help that along?

- I don't know.

You know, obviously it's a, Sentinel is a project, which is a multi-state project to replace the Minuteman missiles that are buried in silos in North Dakota, Wyoming, and Montana.

And it's a long-term project.

It's like, the largest DOD, Department of Defense contract.

I don't know if it's in the history of DOD, but it's a huge, I mean, we're talking billions and billions of dollars over 10 years.

And so I would say the opportunity to affect that project is more at the federal level with Senators Hoeven and Cramer.

Because as I understand, the proposal now is to start off with the missile fields in Wyoming, then to go to Montana, and then to North Dakota.

And I think there's an effort, and it makes sense, to do preliminary parts of those projects starting in all three states.

And if that does happen, Minot could turn into another boom town like Williston and Watford City did during the height of the Bakken boom.

- I know that Hoeven and Cramer have been pushing this idea, do it at once because that can actually save money.

- Right, right, yeah.

And so from a state perspective, we've been offering support to the communities, Minot in particular, to say, "Get ready for this 'cause this is gonna be like a tidal wave or a tsunami of contractors and employees."

And it could potentially overwhelm housing and other infrastructures in the Minot area.

So we've been trying to help the Minot Chamber and some others prepare for that.

But the feature I like about what Senator Hoeven and Senator Cramer are talking about is, all right, let's not leapfrog from Wyoming to Montana to North Dakota.

Let's do a little all in the same three communities so there's not that huge surge that sort of can be disruptive to communities like Minot.

- I want to head over to education, because one thing I haven't had a chance to ask legislators about very much is this idea of these education savings accounts that Governor proposed in his State of the State Address and the budget address.

What's your take on that?

- Well, I support school choice.

I think that the parents should be able to make decisions and be supported by state dollars when it comes to where they want to send their children to school.

That's not a, I wouldn't say that's a controversial, but there's a lot of division about whether we should take state dollars and allow them to be used to send a child, a student to a private school.

I do support that.

The educational savings accounts, there's a number of proposals out there.

And honestly, there are things that I like about two or three of 'em in terms of, there's one that, you know, is really saying, "Okay, we're gonna give so much to public school students, so much to homeschool, maybe a little more to the private school students."

There's proposals that would say, "Well, we don't really wanna help all the private school students, because, you know, if they come from high income families, that's not where the public dollars should be going."

And I agree with that as well.

So there's, gosh Dave, there's no shortage of proposals in the House and Senate.

I could, I know Representative Heinert has one, Representative Koppelman, Senator Axtman, Senator Wobbema.

There's four.

Oh, and Senator Wallin, there's five proposals out there.

- So maybe you get the best of the five and come up with one bill, perhaps?

- Yeah.

Although what I think will happen is, you know, the core of what the House and Senate like the most will sort of emerge as the leading choice.

And then if there's something in the other three or four that people like, they'll amend those into that bill.

- Since we're on education, I'd like to ask you about Senator Myrdal's bill, which would call for, you know, a study of higher education over the next two years.

She, in that measure, she talks about things like satellite campuses and maybe trying to reduce overhead in the system and maybe just look at higher education's direction.

So what did you think of that particular proposal?

- Well, I am always, to me, I'm always interested in looking at reexamining the status quo.

And that's true not just of higher education, but all of the formulas we have.

You know, the $11,000 per pupil funding formula that we have, the funding formula for higher education is based on the number of credit hours that are earned by the students.

And to me it's really, I think sometimes it drives the process too much where legislators don't exercise discretion and decide where we need to put more funding within our higher education system.

And it's all, we've become a slave to the credit hours times the dollars.

And all the legislature does is they're the calculator.

How many credit hours did you get?

And here's how many dollars we're gonna give per credit hour.

And to me, you know, we should be looking at a lot of other factors.

And I'll give you an example.

NDSU has more students that go on campus and physically move into the state of North Dakota, move to the Fargo campus.

And it costs them more per student than let's say an online student, a remote student.

And to me, we should be rewarding that fact, because when we have such a dramatic workforce challenge and I see that students are in Fargo, I wanna reward that, because we have a greater opportunity to retain those students into our workforce than if they're attending one of our classes from some remote location even outside of the United States, we don't have as great a chance of bringing those people to North Dakota.

- So maybe a tweak in the formula perhaps, or maybe something even different?

- Tweaking the formula.

And I've advocated to get rid of the funding formula.

I don't like 'em.

I tell people, "We got along with funding formulas in higher education for over 100 years."

And now we seem overdependent, overreliant on them and we allow them to substitute the formula for judgment.

And I don't like it.

- I also wanted to ask you about construction projects.

- Sure.

- There was really concern, is there going to be a new state hospital?

And I know Senator Mathern has a bill basically to take and just renovate what they have at Jamestown and do regional centers.

But the Governor has proposed a state hospital in Jamestown at the tune of $300 million.

So how do you come down on that?

- We will endeavor to build a new state hospital.

I don't know if $300 million is the right number.

You know, at the end of last session, we appropriated $12 million for the design work on a new hospital.

And we still are not to the point where we have construction drawings.

And that's important.

Construction drawings are the documents that contractors and construction managers need to bid off of to give us a number.

And so we're kind of in this in between zone where we don't have the design that's progressed to the point where we can get bidding.

But yet we know, I'm with the governor, we do need to build a new state hospital.

- So why did that not happen?

- That is a very good question, Dave, and I cannot answer that question.

It is a vexing question.

Can't answer it.

I can tell you, you know, I think there's consensus among Leader Lefor, myself, and the governor, that we do need to go forward with the new state hospital in Jamestown.

- Now, that will be bonded, correct?

- No.

- That is not, okay, that's general fund.

- No, well, the Senate's position is we will not do bonding for it.

We do have a surplus.

There's no economic case to be made for bonding in today's environment.

- I know that the Governor's wanted to take a look at bonding.

But every, say, financial expert I've talked to said now is not the time.

- Right, right.

And I would agree with those folks.

I mean, we've looked at it.

You know, you start talking about the rates and what we could do with our surplus that we have.

You know, we've got $1.5 billion in the SIIF fund, which is our backup checking account.

We've got a projected excess balance in the general fund of $500 million.

So we do have cash.

And you know, we had this study that told us average over 10 years that the interest that we earned on our excess cash over a 10 year average is like 2.36%.

So to me, I mean, if you have the cash, you know, why would you borrow money at 5.5% when you can't even earn 2.5% on your excess cash?

And so we've got other tools.

I mean, the Bank of North Dakota is, as President Trump might say, it's a beautiful thing, right?

It helps us borrow money without incurring the expenses of long-term bonds.

So we have that option, and that's probably the option we'll exercise.

- So in a couple minutes, we have about two and a half minutes left, I'd like to ask you, what are the hidden issues that will be ones to watch from your perspective?

- Hidden issues, oh, that's a good question.

Well, I think for me, the hidden issues are, you know, there's five different proposals out on term limits, term limits on legislators.

Because people realize that, it hasn't hit hard yet, but it is gonna hit hard, that the citizen legislature, there's a certain amount of learning time that it takes to know what's really going on.

And I would say it's probably two plus sessions.

But term limits are going to impose a limitation of two terms per house.

And that's gonna have an overwhelmingly profound impact on the legislature, because the legislature is supposed to be the, you know, the policymaking branch of government.

And I think that is going to fall to the executive branch and it's gonna fall to others.

And I think legislators are starting to realize that, the senior folks and the younger folks.

And they're gonna make reforms to adapt to that eventuality.

- So we need to watch for that.

There are going to be some statutory things or maybe even something, well, not necessarily constitutional, but statutory, perhaps.

- Well, there'll be both.

- There'll be both?

- There'll be both, statutory, constitutional.

I'm sure you're aware that we wanna fundamentally reform legislative counsel just because, you know, in terms of providing oversight over spending, we don't do that because we don't have those folks right now.

- Okay, quickly.

Annual sessions, yea, nay?

- Nay.

- Okay.

I know that there's a bill pending on doing some kind of reconvened session and keeping it at the 80 day limit.

- Yeah, there's several proposals.

And I would say I'm old school.

I like the citizen legislature component.

And I think we'll lose that.

If we go to annual sessions, I think it'll become a career rather than a, you know, I come down here for four months every two years, and then I go home, go back to my job, back to my family.

Annual sessions I think is the pathway to career politicians.

- [Dave Thompson] Well, Senator, thank you very much.

- Thank you.

- We've run out of time.

Our guest on "Legislative Review", Senator Dave Hogue of Minot.

He is the Senate Majority leader.

And for Prairie Public, I'm Dave Thompson.

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