(upbeat music) - Welcome to North Dakota Legislative Review.

I'm Dave Thompson.

Thanks for joining us here on "Prairie Public."

Our guest is the chairman of the Senate Appropriations Committee, Senator Brad Bekkedahl of Williston.

Senator, thanks for being here.

- Thank you, David, to you and your viewers.

It's a great opportunity.

- Well, we're glad to have you on because next week's gonna be an important week in terms of wrapping up the session and getting budgets finally done.

You're going to hear your revenue forecast next week.

- Yes, that's correct.

On Tuesday morning, we'll be hearing the review jointly with the House Appropriations Committee for the Moody's analysis, which is done by the executive branch, and then on Wednesday morning we will be hearing the analysis that the legislative branch does through S&P Global.

- Do you expect a lot of differences from what you started?

- The preliminary things that I've seen show that there will be some slight increases in both of those.

I can't quantify 'em yet, but it looks like we're being told that there will be some increases.

How measurable it will be in a $5.5 billion general fund situation, I can't tell you.

But the good news is it will be an improvement over our initial analysis.

- I know a lot of things are in the balance on that.

For example, raises for state employees, state aid to schools may be in balance and tax cuts might be part of the play here.

So are you expecting that right after that there will be movement on those major budgets?

- Yes, Dave.

I think what we're doing right now is we will have those hearings next week, and then the week after, the House and the Senate will agree to both pass resolutions of new figures for our general fund balance.

We'll do that not jointly, but at the same time.

And from there, the appropriations committees in both chambers will start kicking out agency budgets and then working on what we call orphan bills, which are our bills not tied to any of the agency budgets.

- So what are the biggest budgets you have before your committee this second half of the session?

- Right now we're dealing with the higher education budget, and I have that in my education and environment division much like the House has.

And then the North Dakota Department of Transportation is a large budget bill that's in our government operations division as well.

And then within our human resources division, we have the Department of Corrections, as well as the ITD budget.

They seem a little bit not connected, but they really work well with the personnel I have on those committees.

- Now this is a change for Senate appropriations.

House appropriations has had subcommittees.

This year the Senate appropriations has decided to do subcommittees.

- Talk about that.

- Yes, David.

We did a couple of things.

We had Senate appropriations.

The two sessions before this one I've been on, there have been 14 members in total.

As you know, the legislature is predominantly Republican.

So we had 12 Republicans and two Democrats because of the last election cycle.

We would've gone down to 13 Republicans and one Democrat.

The change we made this year is we going to divisions.

We opted to have a total membership of 16 on the committee.

So we have 15 Republicans and one Democrat.

I have three divisions each with five members on the divisions teams.

So they're the ones that are vetting the bills right now as we go through the agencies, and then I chair the full committee.

- Now I just wanted to get into a few of these things.

I know you had an overview of higher education, and you saw what the House did to it, some of the amendments they added to it.

What do you think about the amendments specifically about NDSU, and also presidents being given, if they're non-renewed, then the payment would come from the system office rather than the campus.

- Yeah, you know, that does create some real difficulties for the system office.

Just a little bit of a review on that, the Board of Higher Education has had a process for a number of years dealing with when presidents leave the institutions and how they're replaced.

That was followed in the case that we're talking about here.

So once a contract is signed, there's a renewal obligation at the contracts or two year contracts.

There's a renewal review at one year, and if it's a non-renew and then everybody knows that they're gonna have to get a new president at that institution.

But there's a payment process that goes out in that next year that's already delineated in the Board of Higher Education.

I personally feel like even though we have the control of the funding as the taxpayers representatives, I really feel like the Board of Higher Education is a quasi entity in state government.

They're really not under the purview of the governor, and they're really not under the purview of the legislature, but we do control some of the things that they do.

And my take is that the Board of Higher Education has those processes in place.

They should be followed.

The House is attempting to make some changes in those.

Right now I'm leaving that up to my education environment division to decide how to handle that, and I'm sure they will really well.

But it could become a conference issue between the two chambers if we disagree with that in the end.

- That could be one of the big conference issues toward the end of the session.

- [Senator Brad] It could be.

I hope not, but it could be.

- One other thing in higher education that I just wanted to talk about the building structure.

This is a little change because it's a four year process this time.

- Right.

- As the House decided it.

- Yeah, and so what they've done is the governor, there was requests as always are requests from all the 11 institutions for building projects.

Sometimes they're demolition of old buildings, sometimes they're repairs to buildings, sometimes renovations, and sometimes they're brand new structures.

But this year what happened is there was 11 institutions that brought 11 projects forward.

The governor recommended eight of the 11, didn't pick up three.

And then the House, what they talked about doing was giving each institution at least a project on a funding list for construction.

And so when they did that they said, but you can't come back and ask for anything the next session.

So it's gonna be a four year project plan.

The dilemma we're running into, it's about a $480 million package when you put 'em all together.

That includes a hundred million dollars for extension, ag extensions, NDSU.

And the dilemma is gonna become how do you fund that in one session?

Because while it's a four year package, it's really a this year funding issue.

And so what we're talking about, at least in the Senate side, Senator Sorvaag from Fargo, who chairs my Education and Environment division, has been talking about how do we break this down and not try take it all at once?

- Now there is also a requirement that a local match for these two.

- Yeah, for the first time there is a requirement.

There have been local matches provided before in many of these projects, but this time they're going to quantify and say that any institution below the two university research centers would be required to provide a 5% match on the cost of the project, and research institutions would have to provide a 30% match to their projects.

- All right, it's not higher education, but it is kind of building project center for technical education.

They got the money out upfront that was promised from the Feds, and that's borrowed against the Bank of North Dakota, correct?

- That's correct.

So we have since this special session when we approved the allocation of $88 million to the career technical centers across the state.

They're all regional and they're across the state.

Some of them exist and these would be additions, some of 'em are gonna be new facilities.

Each facility that was eligible for up to $10 million in a grant, but they had to match it one for one with local dollars.

What happened was we sent $20 million out the door early that we had some other funding from the Feds to do that that was accessible from the CARES Act, or from the ARPA dollars, excuse me, recovery Act dollars.

And the CARES Act dollars that we obligated to these institutions, the Office of Management and Budget had submitted our guidelines that we are adhering to for the disbursement of the funds from the federal government.

Treasury in DC has never approved that yet.

So for over a year and a half, it's been sitting there waiting for approval.

In the meantime, our projects wanna get off the ground, they wanna get constructed, inflation's taking its toll.

So what we've done this session is we have put in a provision, and it's already been passed both chambers and already signed by the governor, that the Bank of North Dakota would give us a line of credit, which opens the door for when the federal funds come in, we can get them repaid.

Had we just funded it and not done the line of credit, there was an opportunity there for the federal government to not fund us at all and say you've already done the project.

- But there is also a construction inflation bill, correct?

- [Senator Brad] There is.

- A separate bill?

- There was a separate consideration on the House side in the CTE budget.

They requested $40 million, the agency requested $40 million for inflation on those projects that's occurred over the last year and a half.

And that would've been, the figure was 25% inflation is what they were looking at.

The House took that out, and they wanted to wait until after we get our new budget forecast next week.

So then it's in our court now.

We have to see what we're gonna do with that pending the new forecast.

- So again, that's one of the things that is almost dependent on what the forecast says next week?

- It is, that's one of the real big ones that we have to look at to see there was interest in funding it, we backed it off before crossover on the House side, and they said, "We want you to look at the new numbers and see if you can fund it in the Senate."

And then with that tells me that if we can find room to fund it in the Senate, it may not be a conference committee issue because they've indicated, look at this.

- And we mentioned a couple other things that are dependent on that forecast.

One is K-12 funding, and perhaps property tax relief.

And just to explain, in order to receive funding from the formula, a local district has to levy 60 mills then.

And they cut it to 40 mills, but the plan is to maybe reduce it to 30 mills for more property tax relief.

- So what's happening, there was a Senate bill by Senator Don Shively in the Senate side, and he's chaired our education committee as you know for years, and he's now on appropriations with us.

And his bill essentially built on what happened from the 2013 session where the state to fund more of the local education costs, took 115 mills off of the local education authority to fund schools.

Removed that so that the school districts could not tax the citizens for those 115 mils.

A huge obligation, but took it onto the state.

This is a continuation of that It would take down another, the way it's written right now would take down another 20 mills that they couldn't tax the citizens for.

With the idea that eventually we get down to as close to zero as we can over time.

We're hoping that that's successful in the house.

That's in the House right now past the Senate.

- And talking to Senator Shively, he said that as a placeholder, it was 40 mills.

He really wants to go down to 30 if he can.

- That was his original bill was to go down to 30.

We backed it up to back...

Put it back up to 40 because we're trying to keep within some constraints that leadership and the appropriations committees have talked about for overall property tax relief.

We know we can't afford all of it, so how do we blend it together?

The House has been insistent upon income tax relief as is the governor.

I'm sure you've seen some of his discussions on that.

The Senate, however, has been focused on property tax relief.

So we did send to the Senate or to the House two property tax bills.

One is the buy down, we call it the buy down of the mills in the school district, the 40 mills we're talking about here.

And the other one is an extension of the homestead tax, the property tax, and that would apply to anybody 65 or older, primary residence, it would give you property tax relief for the first $200,000 of value of your property, and it removes the asset limitations.

So we don't care how many assets you have, we're just trying to give you property tax relief for your primary residence.

- Now I talked to both leaders, you know, both majority leaders, and they're talking about probably rolling these into one package.

Property tax relief along with the income tax relief.

- Yeah, that would be up to them at this point.

We'll do the mechanics however they ask us to do it, but at this point, it would be nice to get that out.

My take would be sooner rather than later.

Reduce any friction between the two chambers and get it cleared out.

As appropriations chairmans, Representative Vigesaa and I need to work on what that number is.

If it's 600 million, is it 700 million, does it go higher or lower from that?

That's the issue we're having right now.

Initially, we talked about something around 600 to 700 million in total tax relief.

- Okay, so that would be both property and income then.

- [Senator Brad] Correct.

- Well, since you brought up this.

One of your appropriations committee members said to me, and he was smiling when he said it to me, he said, "You know, it used to be that the House was doing all the cutting and the Senate kind of restored stuff.

Now the senate's doing a lot of cutting."

- Well, this has been a different session from that aspect.

Really what's happened from the base budget levels, which is what we go off of, and then we build the budgets on top of that, the base budget levels, we came into the session with base budget levels that really did match the expenditures or appropriations we could work with.

So that was a good sign.

But what's happened is the Senate sent bills to the House, appropriations bills to the House, that were about 20% above that base level.

The House sent us back appropriations bills were over 30% above that level.

So it looks like the Senate is gonna have to do more cutting than the House because they sent us higher appropriation numbers than we sent them.

- But yeah, that seems to be kind of bucking the trend.

- That has not been the trend.

You're exactly right.

Usually, the Senate has been looked at as the more generous chamber when we deal with these things.

But, you know, we have all new people in place.

We have new majority leaders in both chambers, we have new appropriation chairs in both chambers, and we have, I have all new division chairs because we've never had that before.

The House has at least, well one of their three is a new division chair.

So just the changes in personnel are gonna guide some of the difference.

- Now state employee pay.

Correct me if I'm wrong, but I think it's 4% per year for raises.

- [Senator Brad] Correct.

- I know there's been some talk about that, that the forecast is gonna say maybe we can go higher on that.

- That's the hope, David.

You know, we wanted to make sure that the state employees realize that they're important to us.

They provide a lot of services to the state, and we haven't been able to be as generous in past as I think we should have.

And so what we're doing is we're looking at 4% the first year, 4% the second year.

The governor recommended 6% the first year and 4% the second.

We just felt until we get our second forecast, we should at least let them know we're thinking about 'em with the four and four, with the idea we can go up to maybe six and four.

I know there's even asks to go higher than that.

I will tell you that it sounds like to go from four and four to six and four is about another $20 million put into the appropriation mix.

- Okay, $20 million may sound like a lot of money, but given the state's financial position right now, it's maybe not that bad?

- If we see increases in the forecast that what's coming up next week, I think the 20 million is way more doable than not.

- Since we're on state employees, the issue, let me just ask you about defined benefit versus defined contribution, which is probably going to be one of the last issues that probably will be negotiated at a conference committee.

So where do you come in on that?

- So, you know, every session I've been here since 2015, we have dealt with this in some form or fashion.

And sometimes we just don't deal with it all, but it's there and we have discussions.

The House has made it very clear that they prefer ending the current defined benefit plan for the state employees, and going to a defined contribution.

The Senate made it very clear that our chamber wants to continue the defined benefit plan, which is preferred at least by the existing state employee base.

So I think that's why we made that decision.

It could be an issue, as you said, that go to the end of the session.

It has gone there before.

I'm hoping that we can work out some type of, if not a compromise, at least an agreement between the chambers for one or the other before we get to any serious discussion down the road.

I dunno if that's possible.

Again, that's another one of these that we're all saying this is gonna be a leadership issue.

When the leaders come to some kind of agreement on how they think this could work best, I think the chambers will follow.

- All right, you had water in the first half.

- [Senator Brad] We did.

- Where's the water budget in terms of projects that were approved, how much you're spending?

- So the total water budget I believe is over $600 million this year.

And there are some carryover because sometimes projects are funded from the last biennium that have to carry over completion into the next biennium.

So some of that's carryover.

We have a system of buckets there where municipal projects get so much money in a bucket, rural projects get so much money in a bucket, flood control gets so much money in a bucket.

It's very well defined.

Senator Sorvaag did an an absolutely outstanding job with his education environment division putting that together.

Extensive hearings, extensive meetings.

I think he really did a nice job of putting that together with everybody's input.

I hope the House is able to look at it and honor most of what he did.

- Yeah, water's a difficult issue because of all the demands for water right now.

- It is, and the nice thing is though, we have a funding source for that with our resources trust fund that gets 20% of the extraction tax oil revenues directly into that fund.

So having a self-funded status limits the amount you can spend, but it also means you spend it every session.

You don't have to worry about where's the money coming from the next session.

- And the huge project, which was the Fargo diversion and the River Flood Control Project, that's off the table because that was paid for two years ago.

- Yeah, we did that with bonding and we're paying those bonding payments from the Legacy Fund interest earnings, and it's about $102 million of biennium, and it's a 10 biennium payout.

So we took about I believe it's about 600 million some dollars from that bonding package, and actually paid off the diversion, paid off the obligation we had made to the full diversion payment.

So they no longer come in and compete for the bucket dollars.

It gives us more ability to fund municipal, rural, and the other buckets.

- Now the other Fargo project of course is the River Water Supply Project, and that's a big ask as well.

What's the status of that?

- So what we passed in the Senate was appropriation not as much as they asked for.

I believe they asked for over $200 million, and the appropriation, if I remember right, was somewhere around $170 million in our version of the water budget.

Department of Water Resources.

But we also put legislative intent language in that said, this is how much we're going to fund of your project.

And I may be off a little bit here, but I believe the number of legislative intent from the start of the project, which we've already funded some of to the end, is somewhere around $960 million.

So really large project completion, but having the intent language there at least guides the discussion for further funding.

- And the another big project that I've been looking at is the Souris or Mouse River Flood Control project.

76 million, I think now.

- Yeah, you're right.

We had asked for over a hundred million for that project in the next biennium that would've helped them accelerate some project development.

But, you know, there's limitations of how much you can do.

So we're hoping with the 76, which is an improvement over what they've been getting, that that project can come to its completion soon too.

And we did have legislative intent, I think back in the 2015 or 2017 session on that project, and we're following that legislative intent to get it fully funded.

- And the one of the reasons they asked for a hundred million dollars was construction inflation, which is again, what's facing other things.

- Their goal, and it was perfectly reasonable, their goal was to get a little more money up front in every session for the next four sessions.

And then they would've taken the funding need out of the fifth session ask.

They would've said, if you fund us in four instead of five, it'll take a little more money than each of those four years, but we don't need the fifth year.

And they would've saved themselves all the inflation increases.

- You're right.

- Now transportation is coming to the Senate now?

- It's in there now.

- And what's the bottom line so far?

- So the big thing in the funding for DOT is the funding match.

We have to supply a match.

We're one of the few states that makes the match requirements to the federal dollars.

It's an 80-20 match so every dollar, every $4 we get from the Feds, we have to provide another dollar to match it.

This year I believe that the request needed to match the federal monies because they've opened the gates down in DC, and there's more money coming than there used to be.

120 million more in formula funding to the state above what we already got every year for the next five or six years.

That's requiring about a $350 million match requirement from the state.

The DOT also has an ask out there for about $220 million, which would be applied to an account for discretionary grant application.

The feds have discretionary grants that you can apply for, but you have to put more money in as a match to get the federal money.

We've been doing 50-50 matches, and we're still not getting very many of those grants awarded to us.

Some places are providing 80% state match to get a 20% match to it.

So if when it comes down to that, we know we need discretionary dollars to match that, and the third fund that they have is about $115 million that the DOT wants to have a totally of state money for what they call a flexible fund.

When projects are developed in communities, or counties, or rural areas, or even the larger cities and there's a substantial road need to connect that project to a major corridor, the DOT wants to be able to come in there with flexible funding and help fund that substantial industrial corridor.

- Well that begs the question for your area of the state, the possible four laning of US 85.

- Yeah, and right now the DOT has let the contract for the next 10.2 mile segment from Watford City to the New Long X bridge, that's a four-lane project that's funded about the bid was about $77 million.

So they're actually gonna move forward with that starting this year.

So we would essentially be completed at that point from Williston, actually west of Williston, through Williston on 85 down to the Long X bridge, which is a distance of over 60 miles.

But we still have to get down a couple of more segments.

They're planning right now the segment that goes from the Long X bridge through the south breaks of the park area to the turn to Killdeer down by south of Grassy Butte.

And that's another $169 million, so they're planning for that.

We're hoping we can get that funded in a couple of future sessions.

And then from from that area, the Killdeer Highway 200 turn down to Belfield would be the last segment.

Then they don't have any planning on that.

They do have an environmental impact statement that's completed by national standards.

So that's good news.

It's ready to go, but they haven't started the planning.

So it's a bit by bit process to get down there.

It won't all be done at once.

- But it is coming along?

- At least there's planning provisions to do that at this point.

- We've got a couple minutes left.

I wanted to get into childcare because you been looking at childcare issues.

- We have.

So between the two chambers, we came up with, between the agency requests, a lot of the childcare requests on the governor's recommendations actually come through the Department of Human Services.

There's the coordination used to come some from commerce, and some from education, and some from DHS, and we've finally gotten to the place where we've said, let's put 'em all in one place because you get duplication, you don't even intend when you have 'em in different agencies.

So they're all gonna be through the DHS right now.

The difference is we also have some, again, orphan bills by independent legislators that actually pile more costs into that.

So the governor's recommendation was for $73 million in childcare expenditures.

He was very well vetted through that.

He had a year of research by some of these workforce committees working on it.

I think it's great recommendations.

We're gonna be hopefully be able to take the 123 million we have right now in request that we've approved back down closer to the 73 million, and still do the job.

- Okay, now is your committee handling that now or is it the House?

- It'll be the House because they have the DHS budget right now.

- [David] Okay.

30 seconds.

- Very good.

- When are you going to adjourn sine die?

- The plan was to try and get done.

Well, we have an 80 day limit, which would be April 28th.

The plan right now is to try and get done before that and save between five and seven days.

- So that would be called back in if you need to?

- [Senator Brad] That's correct.

- Senator, thank you for being here.

- [Senator Brad] Thank you very much.

Appreciate it.

- Our guest on "Legislative Review" this week, Senator Brad Bekkedahl of Williston.

He is the chairman of the Senate Appropriations Committee.

And for "Prairie Public" and "Legislative Review," I'm Dave Thompson.

Thanks for joining us.

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