North Dakota could lose hundreds of millions of dollars of federal stimulus funds if a bill passes the Legislature dictating that lawmakers appropriate all the money, a state budget official told a Senate committee Monday.
The chairman of the Senate Appropriations Committee said legislators will certainly act to ensure federal funds are not jeopardized, and the House majority leader said the Legislature will find a way to control the spending even if it has to convene in a special session later.
House Bill 1487, which states that any stimulus funds coming to North Dakota must be appropriated by the Legislature, passed the House 91-2 on Feb. 3. That was before Congress passed the American Recovery and Reinvestment Act, otherwise known as the stimulus bill.
The state has to act so it's not harmed by the feds' use-it-or-lose-it restrictions or grant deadlines on some funds, Sheila Peterson, fiscal management director for the state Office of Management and Budget, told the Senate Appropriations Committee.
An example is the use-it-or-lose-it restriction on education and transportation funds in the stimulus package, she said. The federal government will set deadlines and if states don't use their allotted funds by the deadlines, the money will go to another state, Peterson said.
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If state agencies have to wait for the Legislature to meet and approve spending the funds, they could be lost, she said.
"There is the question of substantial research dollars (in the stimulus) that may be available to North Dakota State University, University of North Dakota, the medical school and other campuses," Peterson said. "These funds do not pass through the state budget, but we question whether these state schools would be prevented from seeking out research dollars."
Senate Appropriations Chairman Sen. Ray Holmberg, R-Grand Forks, said it appears the bill's language could supersede existing state law that allows agencies to use unexpected funds if they get approval from the state Emergency Commission, a small committee made up of legislative leaders and state officials that meets between sessions for that purpose.
Budget writers are working on estimating how extra federal money will flow into the state so the funds can be put in bills passed this session, Peterson said. But if they estimate too low and HB 1487 is law, North Dakota might have to forego funds that are above and beyond the state's estimates, she said.
The Legislature's House and Senate Democratic and Republican leaders are the sponsors of HB 1487, but none were at the Appropriations Committee hearing.
"It's the Legislature's constitutional responsibility to appropriate money" and it's important that the state not accept funds that are going to create "long-term encumbrances," said House Majority Leader Al Carlson, R-Fargo.
Carlson thinks the state should assure it's not using the funds to start or expand program spending that the state alone will have to continue on its own later, "when this money goes away."
He said the Legislature has to take control of the money even "if we have to come back in to a special session to deal with it."
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Sen. Tony Grindberg, R-Fargo, said during the hearing that legislators' intent is to use such federal funds for one-time spending.
In any case, the committee isn't going to rush to take action, Holmberg assured Peterson and others, saying, "This bill will be held" for later discussion and action.
"The last thing we're going to do is jeopardize money that's going to come into the state," Holmberg said after the meeting.
