W.Va. delegates eye 'future fund' prospects
A bipartisan delegation of West Virginia lawmakers was in Bismarck, N.D., on Thursday to get a firsthand look at how that state has socked away hundreds of millions of dollars in revenue from oil and natural gas taxes.
The trip, attended by 19 state senators and delegates, was spearheaded by state Senate President Jeff Kessler, D-Marshall, who has championed a similar savings fund in West Virginia.
During a phone interview Thursday, Kessler said he believes the natural gas boom from the Marcellus Shale formation has given the Mountain State another chance to build a long-term savings account through energy production. And North Dakota's Legacy Fund, which has raked in more than $1 billion in just two years from skyrocketing oil production there, can serve as a road map, he said.
"We've been an extraction state for the past 100 years, but we have no long-term cushion for when our natural resources and minerals are gone," Kessler said. "With coal seams getting thinner and an increasingly difficult regulatory climate, we have these boom-and-bust cycles that I'd like to get away from."
The group met with 14 North Dakota lawmakers and officials with the North Dakota Department of Mineral Resources, Petroleum Council and Department of Trust Lands to learn more about the history and structure of the state's Legacy Fund and the impact that the oil and gas industry has had on the state.
Kessler said the Bakken Shale formation in North Dakota has provided surging revenues from oil production and is a large reason for its low unemployment rate. North Dakota boasted a 3 percent unemployment rate last month, the lowest in the country. Meanwhile, the state's population grew by 2.2 percent between July 2011 and July 2012, making it the fastest-growing state in the country, according to the U.S. Census Bureau.
North Dakota voters approved a constitutional amendment in 2010 that established the Legacy Fund. Beginning in September 2011, 30 percent of all oil and gas revenues were placed into the fund. More than $1.3 billion has funneled into the fund during the past two years, exceeding initial growth projections by 40 percent.
North Dakota legislators cannot tap into the fund until at least 2017. A two-thirds vote of the Legislature is required.
Kessler introduced legislation earlier this year to create a "West Virginia Future Fund." The proposal would direct 25 percent of the increase in tax collections from oil and gas production from the effective date of the legislation into the interest-bearing fund.
Lawmakers couldn't touch the fund for 20 years. At that point, it could be used for "future needs that may arise including diversification of the state's economy, tax relief, enhancing education and workforce development, and for purposes for which other funding sources are not available."
The bill didn't make it out of the Senate, but Kessler said North Dakota's Legacy Fund proves the idea merits further discussion. If there are any lessons learned from North Dakota, it's that building momentum for a future fund can take a few years and requires bipartisan support, he said.
State Sen. Bob Plymale, D-Wayne, was among the 19 West Virginia lawmakers to attend the trip and the only representative from Cabell or Wayne counties. He said it's apparent that the Legacy Fund has sent a signal that North Dakota is serious about future growth and becoming an attractive place to live and do business.
"I know we have immediate needs, but we always will have immediate needs," Plymale said. "At some point, you have to look to the future and set aside money for it."
One of the challenges for a future fund in West Virginia will be determining whether it should be established through a constitutional amendment or through the legislative process.
"A constitutional amendment may give you more rigidity in how the money is spent, but you also may want a little more flexibility as needs change over time," Kessler said. "That's definitely something we need to have a discussion about to see what is the best fit for our state."
Sending the 19 lawmakers and a few staff members to North Dakota will cost the state $25,481, according to Lynette Maselli, Kessler's communications specialist. Representatives of the business and labor community also went on the trip but paid their own way, Maselli said.
Kessler defended sending 19 legislators on the trip, saying he wanted representatives from different regions of the state.
"It's going to take 18 senators, 51 delegates and one governor to make this happen, so having a cross-section of Democrats and Republicans from areas that are impacted and aren't necessarily impacted by natural gas production is important," he said.
Follow H-D reporter Bryan Chambers on Facebook or Twitter @BryanChambersHD.
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