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The ND Association of Oil and Gas Producing Counties' Education Committee discussed proactive approaches to western ND school funding in a meeting called Wednesday, June 11 by Chairman Steve Holen, McKenzie County Public School District Superintendent. Education Committee members as well as representatives from the Great Northwest Education Cooperative met jointly and reviewed the changes to the oil and gas Gross Production Tax (GPT) distribution formula and how they affected regional school districts. In the last legislative session, a dividing line was drawn in the percentage of local-share GPT distributions to school districts.

McKenzie County School District Superintendent Steve Holen, Chair of the NDAOGPC Education Committee, shares the history of Gross Production Tax distributions to school districts.

Those school districts in counties receiving under $5 million in GPT revenue were designated to receive 35% of the local share. Districts in counties receiving over $5 million in GPT revenue now receive only 5%. This change created problems, especially for school districts in counties receiving just over $5 million. Bowman County School District saw their GPT revenue reduced by about $780,000. Powers Lake School District saw a similar $740,000 reduction. More students, increased property tax valuation, and mill levy increases are not enough to cover the gap in funding made by the decrease from 35% to 5%.

A possible solution Holen shared focused on changing the GPT distribution formula to keep the 35% allocation to school districts in all counties for the first $5 million in local GPT receipts. After the first $5 million, the percentage allocation to school districts would potentially return to the current 5%. A tier funding model was also discussed, which could be used to prevent school districts in high producing counties from accumulating "too much" money. Overall, the GPT funding formula was seen as an appropriate funding mechanism for schools, meant to directly react to oil and gas activity and the correlated student increases/school impact increases.

Another issue that was discussed centered on using GPT revenue for debt servicing of capital construction projects. It was suggested by Holen that it would be important for western ND schools to not have GPT revenue put toward those capital construction projects or debt service on those projects used against them in determining their state aid funding.

Ending fund balance carryover was also addressed. For some schools, especially those with lower student populations, the percentage limit on carryover amounts simply does not work. One possible solution that was discussed was using a tier system to allow for a percentage of carryover plus a set amount. This would allow smaller schools to adequately prepare for potential reduced student foundation aid, anticipated rising expenditures, or problematic changes to the GPT distribution formula.

The committee also talked about the school construction loan program and the need to increase the amount of money available in the program fund. Holen suggested that projects should be given a prioritization number so that loan monies are made available to the most critical projects. Another idea was to remove interest charges on those loans. Finally, since construction costs are higher in western ND as compared to the rest of the state, it was suggested that the state could cover the additional expense required to get those projects done.