The state will invest its "oil money" in "money market instruments" in the Bank of North Dakota currently earning about 1 percent.
This speaks volumes about how much the state of North Dakota trusts the US economy going forward.
The lede:
The board's chairman, state Sen. Randy Christmann, R-Hazen, said he's reluctant to put much of the revenue into the stock market, even though similar funds in other energy-producing states have significant investments in stocks.
"I think stocks would be pretty limited," Christmann said. "Preserving that principal is the priority."
North Dakota voters last year approved a state constitutional amendment to create the new "Legacy Fund," which will get regular deposits equaling 30 percent of North Dakota's oil tax collections.
The first $34.3 million infusion was deposited in the state-owned Bank of North Dakota last week. It will earn less than 1 percent interest there.
The amendment bars the Legislature from spending any of the fund's principal or earnings until July 1, 2017.Very, very sad commentary. [2012 was an incredible year for investors.]
Afterward, lawmakers may spend money from the fund only with two-thirds approval of the North Dakota House and Senate, and they are barred from spending more than 15 percent of its principal during any two-year period.
For another view, click here: this story has been picked up and reprinted numerous places.
One thing that struck me about this as well is that it keeps the Bank of North Dakota a very solvent and "trusthworthy" bank in the midst of many many banks going under. So I think that ND made some very very good choices there as well, as they are utilizing the "unspendable" to prop up another part of the ND economy!
ReplyDelete-RMikesell
And every state should have a mill, maybe a car dealership or two .
ReplyDeleteHow about a string of fast food franchises? Yea, that's the ticket.
This Obama is a socialist. The good folks in ND know how to do things.
Let's propagate that across the whole US.
I can't tell if you're serious or "tongue-in-cheek. Taking you at your word you are correct.
ReplyDeleteThe voters in 9th district NY apparently think the same.
That is a good point.
ReplyDeleteI read the same article and it states that the bank deposit is temporary until the investment board devises a broad investment policy. It certainly doesn't state that the current investment is permanent, as you seem to want to portray so that it fits in with your agenda. If it were permanent, there would be no reason to devise a "broad investment policy," now would there . . .
ReplyDeleteThe seven-member advisory board has agreed to keep the Legacy Fund money in the bank until it devises a broad investment policy for the money, which will include how much should be put into stocks, bonds and other types of investments.
The state has known for more than a year that the money would
ReplyDeletebe available to be invested. So they are just now "devising a broad investment policy"? Also in the article christmann is described as stating that the policy will be conservative thus low rate of return. Obviously unprepared and I expect the fund to sit in 1% range for a looong time with this crowd making decisions.
"The state has known..."
ReplyDeleteActually an entity "like the state" can't know anything. The "state" is made up of 600,000 residents and several hundred leaders (city, county, state, federal). The vast majority of folks had no idea how big the Bakken was going to be, and many still doubt it and don't trust it (bust and boom cycle) ... and if the EPA and/or the judges on behalf of the environmentalists halt fracking, it's all over.
During this extended stay in the Bakken, I am amazed that the "man on the street" does not know what is going on in the oil patch, except that the "roads are bad." (And they are not as bad as folks would think.)
Go to the eastern part of the state, and they have no idea what's going on with the Bakken.
And so you are correct. This fund will grow faster than the politicians can even imagine, and they won't even care about 1% interest, as long as the principal is maintained. Good, bad, or indifferent, that's the way it is.
Meanwhile the appraisal values of houses in Williston will continue to skyrocket, and a) property taxes will go up; and, b) insurance premiums will go up.
The governor and legislature knew a year ago when they passed this law the money would be coming in. Instead of preparing an investment plan ahead of time they stuff the money in a matrass while they sit on their chairs and "devise a broad policy". This is an incredible display of ineptitude on the part of whomever is responsible .
ReplyDeleteIt is what it is. I won't repeat myself, but my comments above (no one in Bismarck believed what they were being told). Oil industry is "boom and bust." North Dakota has experienced that cycle more than once. In addition, there has always been concern that the boom could be short-lived with the Damocles sword held by the EPA.
ReplyDeleteTime will take care of this also. It's a nice problem to have.