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-	Interim Information: 1999-2000
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» Legislative Rules

Legislative Assembly » 56th (1999)

19251.01

Prepared by the North Dakota Legislative Council staff for the Budget Committee on Health Care
June 2000

ANALYSIS OF THE TOBACCO SETTLEMENT TRUST FUND FOR THE 1999-2001 BIENNIUM

	1999-2001 Biennium
Beginning balance		$0
Add estimated revenues
Tobacco settlement revenues collected to date	$29,954,608
Remaining tobacco settlement revenues	22,229,180
Total estimated revenues		$52,183,788¹
Total available		$52,183,788
Less estimated expenditures and transfers
Transfers to the community health trust fund (10%)	$5,218,378
Transfers to the common schools trust fund (45%)	23,482,705
Transfers to the water development trust fund (45%)	23,482,705
Total estimated expenditures and transfers		$52,183,788²
Ending balance		$0
¹ Estimated revenues - 1999-2001 biennium - Tobacco settlement proceeds, which will be deposited in the tobacco settlement trust fund, are estimated to be $52,183,788 during the 1999-2001 biennium. (This estimated total includes four tobacco settlement payments received to date by the state totaling $29,954,608.) At the end of the 1999 legislative session the tobacco settlement proceeds for the biennium were estimated to be $57,593,770. The decrease in the estimated amount of tobacco settlement revenues for the biennium of $5,409,982 is the result of volume adjustments made to payments received. A volume adjustment is an adjustment made to a settlement payment to reflect increases or decreases in tobacco manufacturers' operating income from cigarette sales. North Dakota Century Code Section (NDCC) 54-27-25, created by 1999 House Bill No. 1475, provides that interest on the moneys in the tobacco settlement trust fund must be retained in the fund, and the principal and interest must be allocated 10 percent to the community health trust fund, 45 percent to the common schools trust fund, and 45 percent to the water development trust fund. Any interest earned on the moneys in the tobacco settlement trust fund will increase the amount available for transfers to the other funds. However, because of uncertainty regarding the timing of the receipt of the tobacco settlement proceeds, interest earned on the balance of the tobacco settlement trust fund has not been included in this analysis. Tobacco settlement revenues collected to date were transferred immediately to the proper trust funds; therefore, no interest has been earned by the tobacco settlement trust fund to date.
² Estimated expenditures - 1999-2001 biennium - Tobacco settlement proceeds, which will be deposited in the tobacco settlement trust fund, are estimated to be $52,183,788 during the 1999-2001 biennium. North Dakota Century Code Section 54-27-25 provides that any interest on the moneys in the tobacco settlement trust fund must be retained in the fund, and the principal and interest must be allocated 10 percent to the community health trust fund, 45 percent to the common schools trust fund, and 45 percent to the water development trust fund. Transfers to date to the community health trust fund, common schools trust fund, and the water development trust fund total $29,954,608. Of the $29,954,608 transferred to date, the community health trust fund received $2,995,460, and the common schools trust fund and the water development trust fund each received $13,479,574.
NOTE: The tobacco settlement trust fund was created by the 1999 Legislative Assembly through passage of House Bill No. 1475. This bill creates and enacts NDCC Section 54-27-25 which provides a tobacco settlement trust fund for the deposit of all tobacco settlement moneys obtained by the state. Moneys in the fund, including interest, must be transferred as follows, within 30 days of their deposit in the fund:
Ten percent to the community health trust fund. Forty-five percent to the common schools trust fund. Forty-five percent to the water development trust fund.
The bill also provides that transfers that would otherwise be made to the common schools trust fund during the biennium must be made to the water development trust fund until the amount in the water development trust fund is sufficient to make required bond payments for bonds issued for water projects authorized by NDCC Section 61-02.1-04. Once the amount required for the biennium is transferred to the water development trust fund, an equal amount must be transferred to the common schools trust fund, if available, from the moneys deposited in the tobacco settlement trust fund during the biennium. Once an equal amount has been deposited in each fund, transfers from the tobacco settlement trust fund will be allocated equally for the remainder of the biennium, 45 percent to the water development trust fund and 45 percent to the common schools trust fund. The State Engineer has certified that the deposit of 45 percent of the tobacco settlement trust fund into the water development trust fund will be adequate for the 1999-2001 biennium. Therefore, transfers to date for the common schools trust fund have not been redirected to the water development trust fund.

ANALYSIS OF THE COMMUNITY HEALTH TRUST FUND FOR THE 1999-2001 BIENNIUM

	1999-2001 Biennium
Beginning balance		$0
Add estimated revenues
Transfers to date from tobacco settlement trust fund	$2,995,460
Remaining transfers from tobacco settlement trust fund	2,222,918
Total estimated revenues		$5,218,378¹
Total available		$5,218,378
Less estimated expenditures
Appropriations to the State Department of Health for community-based health programs (no funds appropriated for the 1999-2001 biennium)	$0²
Total estimated expenditures		$0²
Ending balance		$5,218,378
¹ Estimated revenues - 1999-2001 biennium - Transfers from the tobacco settlement trust fund are estimated to be $5,218,378 during the 1999-2001 biennium. (This estimated total includes four transfers to date from the tobacco settlement trust fund totaling $2,995,460.) At the end of the 1999 legislative session the transfers from the tobacco settlement trust fund for the biennium were estimated to be $5,759,376. The decrease in the estimate of transfers from the tobacco settlement trust fund of $540,998 is due to a decrease in the amount of tobacco settlement payments estimated to be received. Interest earned on the community health trust fund is not included in the analysis as the law does not provide for the community health trust fund to retain interest earned. Any interest earned on funds in the community health trust fund are credited to the state's general fund. However, taking into consideration the transfers to date from the tobacco settlement trust fund and assuming the fund receives the remaining transfers on the scheduled dates, the community health trust fund, if it retained the interest, would have earned approximately $240,000 for the 1999-2001 biennium based on an interest rate of 4.9 percent.
² Estimated expenditures - 1999-2001 biennium - North Dakota Century Code Section 54-27-25, created by 1999 House Bill No. 1475, provides that moneys in the community health trust fund may be used by the State Department of Health, subject to legislative appropriation, for community-based public health programs and other public health programs, including programs with emphasis on preventing or reducing tobacco usage in this state. The 1999 Legislative Assembly did not appropriate to the State Department of Health any moneys in the community health trust fund for community-based public health programs. Consequently, no expenditures from the fund are anticipated during the 1999-2001 biennium.
NOTE: The community health trust fund was created by the 1999 Legislative Assembly through passage of House Bill No. 1475. This bill creates and enacts NDCC Section 54-27-25, which provides a tobacco settlement trust fund for the deposit of all tobacco settlement moneys obtained by the state. Moneys in the fund must be transferred as follows, within 30 days of their deposit in the fund:
Ten percent to the community health trust fund. Forty-five percent to the common schools trust fund. Forty-five percent to the water development trust fund.
The bill provides that the community health trust fund is to be administered by the State Department of Health, which may use moneys in the fund, subject to legislative appropriations, for community-based public health programs and other public health programs, including programs with emphasis on preventing or reducing tobacco usage in this state. No appropriations were made for the 1999-2001 biennium.

ANALYSIS OF THE WATER DEVELOPMENT TRUST FUND FOR THE 1999-2001 BIENNIUM

	1999-2001 Biennium
Beginning balance		$0
Add estimated revenues
Transfers to date from tobacco settlement trust fund	$13,479,574
Remaining transfers from tobacco settlement trust fund	10,003,131
Total estimated revenues		$23,482,705¹
Total available		$23,482,705
Less estimated expenditures
Appropriations for interim financing repayments and water project bond repayments pursuant to NDCC Section 61-02.1-04	$0²
Total estimated expenditures		$0²
Ending balance		$23,482,705
¹ Estimated revenues - 1999-2001 biennium - Transfers from the tobacco settlement trust fund are estimated to be $23,482,705 during the 1999-2001 biennium. (This estimated total includes four transfers to date from the tobacco settlement trust fund totaling $13,479,574.) At the end of the 1999 legislative session the transfers from the tobacco settlement trust fund for the biennium were estimated to be $25,917,197. The decrease in the estimate of transfers from the tobacco settlement trust fund of $2,434,492 is due to a decrease in the amount of tobacco settlement payments estimated to be received. Interest earned on the water development trust fund is not included in the analysis as the law does not allow the water development trust fund to retain interest earned. Any interest earned on funds in the water development trust fund are credited to the state's general fund. However, taking into consideration the transfers to date from the tobacco settlement trust fund and assuming the fund receives the remaining transfers on the scheduled dates, the water development trust fund, if it retained the interest would have earned approximately $1,081,000 in interest for the 1999-2001 biennium based on an estimated interest rate of 4.9 percent.
² Estimated expenditures - 1999-2001 biennium - North Dakota Century Code Section 54-27-25, created by 1999 House Bill No. 1475, which provides that moneys in the water development trust fund are to be used to address the long-term water development and management needs of the state. North Dakota Century Code Section 61-02.1-04, created by 1999 Senate Bill No. 2188, provides that bonds issued for flood control projects, the Southwest Pipeline Project, and an outlet to Devils Lake are to be repaid from moneys in the water development trust fund, as appropriated by the Legislative Assembly. The 1999 Legislative Assembly did not appropriate any funds from the water development trust fund for repayment of bond principal and interest; however, the Legislative Assembly did appropriate $84.8 million from the water development trust fund for the purpose of repaying the line of credit extended by the Bank of North Dakota for interim financing. Approximately $1.1 million for the Southwest Pipeline Project was drawn on the $84.8 million line of credit. The funds were repaid with proceeds from the March 2000 bond sales, which will provide $23 million for the flood control project in Grand Forks and $4.5 million for the Southwest Pipeline Project. If necessary, a portion of the Grand Forks allocation may go toward the Wahpeton flood control project, depending on timing. The first payment of principal and interest accrued for the bonds is scheduled to be made in the 2001-03 biennium.
NOTE: The water development trust fund was created by the 1999 Legislative Assembly through passage of House Bill No. 1475 to be used for the long-term water development and management needs of the state. This bill creates a tobacco settlement trust fund for the deposit of all tobacco settlement moneys obtained by the state. Moneys in the fund must be transferred as follows, within 30 days of their deposit in the fund:
Ten percent to the community health trust fund. Forty-five percent to the common schools trust fund. Forty-five percent to the water development trust fund.
The bill also provides that transfers that would otherwise be made to the common schools trust fund during the biennium must be made to the water development trust fund until the amount in the water development trust fund is sufficient to make required bond payments for bonds issued for water projects authorized by NDCC Section 61-02.1-04. Once the amount required for the biennium is transferred to the water development trust fund, an equal amount must be transferred to the common schools trust fund, if available, from the moneys deposited in the tobacco settlement trust fund during the biennium. Once an equal amount has been deposited in each fund, transfers from the tobacco settlement trust fund will be allocated equally for the remainder of the biennium, 45 percent to the water development trust fund and 45 percent to the common schools trust fund. The State Engineer has stated that deposit of 45 percent of the tobacco settlement trust fund into the water development trust fund would be adequate during the 1999-2001 biennium. Therefore, transfers to date for the common schools trust fund have not been redirected to the water development trust fund. North Dakota Century Code Section 61-02.1-04, created by 1999 Senate Bill No. 2188, provides that the principal and interest on bonds issued for flood control projects, the Southwest Pipeline Project, and an outlet to Devils Lake must be repaid with moneys appropriated from the water development trust fund.

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