In November of last year, we published an article detailing the argument that North Dakota’s ethanol subsidies may be unconstitutional. The question arose while reviewing the minutes from the interim Government Finance Committee’s meeting on August 2, 2017. In that meeting, reference was made to ethanol “incentives” being paid out of the state’s Highway Tax Distribution Fund. The problem is that Article X, Section 11 of the State Constitution is very clear about what that fund can be used for— and ethanol subsidies isn’t one of them.
One of the member’s of the interim Government Finance Committee is Rep. Rick Becker (R – District 7). As we indicated in the November article, he requested Legislative Council’s thoughts on the matter. Their response was quite telling:
“The Legislative Council staff conducted research, which included a review of various Attorney General opinions related to Article X, Section 11 of the Constitution and a review of the legislative history of Section 39‑04‑39. It could be argued the transfer of funding from the highway tax distribution fund to the ethanol production incentive fund under Section 39‑04‑39 is not included within the uses of gasoline and other motor fuel revenues authorized in Article X, Section 11 of the Constitution. However, statutes approved by the Legislative Assembly are presumed to be constitutional until declared otherwise by a court. Therefore, the State Treasurer is required to complete transfers from the highway tax distribution fund to the ethanol production incentive fund as directed in Section 39‑04‑39.” (Emphasis Added)
With that response, it was suggested that perhaps the next step in the process was to request an Attorney General’s opinion on the matter. And that is exactly what has taken place. As noted in the most recent March 7, 2018 meeting minutes of the interim Government Finance Committee, Rep. Becker acknowledged that “he has requested an opinion from the Attorney General regarding the constitutionality of highway tax distribution fund revenues being used for ethanol subsidies.”
I will be very interested to see Attorney General Wayne Stenehjem’s opinion on this subject. Unless there is something hiding in the State Constitution, I cannot see how the subsidies can withstand legal scrutiny. But it wouldn’t be the first time something was missed or a game of legal Twister was played to make something okay, when in fact it is not.
If the Attorney General’s opinion verifies our suspicions – which were basically substantiated by Legislative Council – then it appears there will only be two means of remedying the situation. The North Dakota Legislature could resolve it next session or it could be settled through the courts.
Obviously, it would be much wiser – and cheaper for taxpayers – to have the Legislature end the unconstitutional practice. After all, the State Constitution is clear that such funds are to be “used solely for construction, reconstruction, repair and maintenance of public highways, and the payment of obligations incurred in the construction, reconstruction, repair and maintenance of public highways.”
But for now, we wait.