Published November 1, 2002 | November 2002 issue
The state of North Dakota may have to do something that hasn't been done for more than 20 yearstap into the Bank of North Dakota.
As of late August, state lawmakers approved the possible transfer from the Bank of North Dakota of up to $25 million, to help close the budget gap. The Bank currently has about $170 million in capital. If the move becomes necessary, it would not be a loan but a transfer of funds from the bank's equity accounts, acting somewhat like other states' rainy day funds. It wouldn't have to be paid back, said Eric Hardmeyer, president of the Bank of North Dakota. The money would be transferred only as needed, not in one lump sum.
The Bank of North Dakotathe only state-owned bank in the United Stateshas been providing funds to the state's general fund for the past five bienniums. "It is common for the bank to provide earnings to the state's general fund, but dipping into the capital is not common," said Hardmeyer, who added that the bank provides $15 million to the state's general fund every six months.
Hardmeyer expects lower interest rates to hurt bank profits in the coming year, although he believes it will make at least $60 million in profits during the 2001-03 biennium.
North Dakota's treasury now has a $9.8 million cushion, but a recent forecast predicts the state will sink $50 million into debt next year.
Gov. John Hoeven has ordered most state agencies to reduce their current state general fund spending by 1 percent, or $18.3 million, to head off the projected deficit. If that's not enough, Hoeven is counting on the Bank of North Dakota to close the gap.
[See: Banking on the Government: At 75, the nation's only socialist bank is still striving to achieve its mission, The Region, March 1994]