GRAND FORKS — North Dakota's financial picture probably won't look great come January.

The oil industry is sagging under the weight of the coronavirus pandemic, which is keeping drivers at home and airlines increasingly on the ground. And the broader North Dakota economy is suffering, too, as unemployment spikes and the health of small businesses wavers. The state almost certainly will have to deal with a budget shortfall when the legislative session arrives early next year.

So why not tap the Legacy Fund?

The answer from many legislators is simple: it’s just not that kind of money. Maybe tap the earnings, some legislators say, but for now the general belief is that the principal will almost certainly stay off-limits, despite the coronavirus crisis and the economic decline it has brought.

The Legacy Fund, created by voters in 2010, is funded by oil taxes and has grown steadily for years. As of May 31, it was worth $6.83 billion. It has only paid out earnings once: $455 million last year, which was transferred to the general fund. That money was used to shore up state ledgers.

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“It's important — one of the most important creations of our generation,” state Rep. Corey Mock, D-Grand Forks, said this week. “I'm also very cautious for us to start using any of those funds before that fund truly matures. … I've been reluctant to even spend the earnings, let alone the principal."

But state leaders are also keenly aware that residents are watching, and those leaders know it’s important voters stay confident in state finances.

“If you end up with no money, or close to no money, and you say, ‘well, we’re just going to have to tighten our belts more,’ you might reach a point where the citizens say it’s stupid to have $7 billion in the bank, and we as citizens are suffering,” said state Sen. Ray Holmberg, R-Grand Forks. “There could be a tipping point where the citizens rise up and through initiated measure make some drastic changes to the Legacy Fund. Because the argument would be, ‘The state should not be a savings and loan.’”

Holmberg would prefer that doesn’t happen, because he sees the money as a safeguard for the future — not for the present crisis. But although he’d like to keep the fund’s principal saved, he left the door open to use fund earnings to help shore up the state budget.

“There will be reductions in budgets, but there is a point beyond which you’ve got to say, you know, this is too critical — whether it’s education or health or whatever the area,” Holmberg said.

It’s still unclear how much pressure lawmakers will be under to use the money come January, which leaves many legislators in Holmberg’s position — eyeing the money, but not quite ready to break the notional emergency glass and use it.

But not everyone sees the need for that kind of restraint. North Dakota University System Chancellor Mark Hagerott points out that now, of all times, is the time to use the state’s resources — principal, earnings, whatever, to make sure higher education stays strong.

“It's a rainy day fund and if there was ever a rainy day I'd say it's a pandemic and a collapse in oil prices,” he said. He added that universities on the coasts try to “poach” talented faculty and researchers when commodity prices tank, because those universities know they can outbid North Dakota salaries.

“They fully recognize we have all this talent and if people feel vulnerable, they're not sure about the future then (the other research schools) poach people,” he said. “(But) we have the means to reassure people that we are a very well run, relatively wealthy state, and (that) we're going to stay the course on higher education.”

Hagerott’s remarks recall not just the cuts that UND has faced in the last decade, but pandemic challenges, too. In April, then-interim UND President Joshua Wynne said the university was facing refunds on dining and housing, halted operations in the flight school and, at the time, serious worries about fall enrollment.

Andrew Armacost, the current UND president, demurred on using Legacy Fund principal in a Friday interview. “I think the legislators are probably the best ones to answer that question," he said.

Joe Morrissette, who directs the state budget office, said it’s likely there will be a financial shortfall, but it’s impossible to know how big it will be, especially lacking more detailed forecasts he said will only come into focus in late August and September. For now, he points to healthy balances in places like the state’s budget stabilization fund, where legislators will begin looking for extra change come January, long before the Legacy Fund comes into the discussion.

At present, a large portion of North Dakota’s tax income is tied to the oil industry. And state financial documents show that the state is nearly $370 million behind on oil and gas revenue allocations this biennium, a shortfall against projections of about 15%. That comes as the coronavirus crisis slams the brakes on demand and production, with North Dakota wells producing far less oil than expected at a far lower price than forecast. In May, state documents show, the state produced an average of 860,000 barrels per day, about 39% below forecasts, while prices on the oil hovered at about 62% below forecasts.

That’s to say nothing of the state economy, which has continued producing surprising sales tax returns — beating March and April doomsday predictions that consumer activity would fall off a cliff — but could easily be propped up by one-time consumer expenditures. UND economist David Flynn explained recently, in a previous Forum News Service report, that if buyers are merely refitting their homes for remote work, for example — the kind of purchases that will fade — the state economy and state revenues could still be in for an autumn shock.

It’s also worth noting that the Legacy Fund’s earnings are uniquely weak right now. When the fund started receiving deposits in late 2011, they came in at above $30 million each month; that skyrocketed to as high as $117 million in August 2014, at the height of the oil boom. And during 2019, those deposits averaged around $53.7 million each month.

But the fund has seen its most anemic growth since the start of the crisis. Legacy Fund deposits started the year at nearly $60 million in January, but fell precipitously starting in April, tapering off tens of millions of dollars at a time. The July deposit was about $9.4 million.

Well before the coronavirus hit, the state was looking for ways to spend the money. For a year, the Legacy Fund Earnings Committee — a group of state legislators — has deliberated how best to spend the state’s marquee pot of money. So far, many of them seem to agree on at least one thing.

“Give us at least a generation for the legacy fund to build. Let us work with the earnings,” said House Majority Leader Chet Pollert, R-Carrington, the committee’s chairman. “The voters put that in — I don’t think they put that thing in to say, ‘OK, let’s tap that thing at 10 years.’ I think they were talking generational, when they put that thing in place.”

Senate Majority Leader Rich Wardner, R-Dickinson, sitting alongside Pollert in a joint interview earlier this month, agreed.

“I would be a ‘no’ on the principal also,” he said. “And I really believe, if people will be patient, and leave (the principal) alone, the earnings will be large enough to take care of our needs and our priorities. So, it’s being patient, and we can do it.”

Forum News Service reporter Sydney Mook contributed to this article.