- Associated Press - Wednesday, March 13, 2019

BISMARCK, N.D. (AP) - The possible misallocation of millions of dollars in North Dakota oil money may have affected a third constitutional fund, lawmakers were told Wednesday.

The Legislature for the past few weeks has been dealing with the revelation that about $137 million in state revenue from the oil-rich Fort Berthold reservation did not go the common schools trust fund and the foundation aid stabilization fund, as it should have.

State engineer Garland Erbele told the Senate Finance and Taxation Committee that the constitution-mandated resources trust fund that benefits water projects was shorted, too, by about $125 million.

Erbele said there are $1.5 billion in water project needs in North Dakota and “those dollars could have been used.”

Republican leaders have argued the money was correctly distributed by GOP Republican state Treasurer Kelly Schmidt, based on guidance from the attorney general’s office in 2012. But they have introduced legislation that would begin steering some oil tax money into the funds for now on, but not retroactively.

Education and water groups told lawmakers Wednesday the money should be repaid retroactively.

The committee took no immediate action on the legislation.

Mike Nowatzki, a spokesman for GOP Gov. Doug Burgum, said the governor agrees the money “absolutely” should be reimbursed.

North Dakota’s Land Board led by Burgum on Monday directed Land Commissioner Jodi Smith to testify before Senate committee the money should be made up to the school funds.

The effect of not doing so “will impact the state of North Dakota for generations to come,” she told the committee.

Republican lawmakers contend North Dakota’s schools - and now water projects - were not shorted money in the past, and blamed any problems with “ambiguous” language in the law.

At issue is whether distributions to the funds should also include the state’s share of revenue from drilling on the federally recognized sovereign reservation, or just from oil tax revenue on state lands.

The distributions have been made based on the latter.

“We believe arguments could be made on both sides,” said Emily Thompson, a lawyer for the Legislative Council, which is the Legislature’s nonpartisan research arm.

Burgum has said North Dakota is on solid financial footing and it would not greatly affect the state’s budget to refill the funds “retroactively.” Burgum also said the money could be repaid over time.

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