Protected by the Constitution
The Legacy Fund’s core savings, called the principal, is protected by Article X, Section 26 of the North Dakota Constitution. Spending any of it requires a two-thirds vote of both the House and Senate, and even then, no more than 5% can be spent in a two-year budget period.
So far, the principal has never been spent. Every dollar the state has spent has come from investment earnings.
Formula Determines Earnings
Every odd-numbered year on July 1, an amount equal to 8% of the Legacy Fund’s five-year average value moves into the Legacy Earnings Fund where it becomes available for legislative spending.
The average is based on the Fund’s balance at the end of each fiscal year (June 30), ending with the most recently completed even-numbered fiscal year, as reported by the State Investment Board.
Averaging Keeps Funding Steady
Using five years of data smooths out market swings, so one particularly strong or weak year has less effect on what’s available. That makes funding more predictable from one budget period to the next.
North Dakota uses the same approach for the Common Schools Trust Fund, and many peer sovereign wealth funds use it too. It turns an unpredictable number into a stable one that is easier to plan around.
Legislature Determines Spending
Legacy Fund earnings are directed to purposes set in state law, through bills that the Legislature debates, amends and votes on in public, like any other spending decision. Since 2017, more than $2.5B has been distributed.