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Omdahl: Should legacy funds be invested in North Dakota? - INFORUM

Having served on the State Investment Board on behalf of Gov. George Sinner, I have had a continuing interest in the $8 billion pot of gold accumulated in the state treasury from oil revenue.

The Forum and KX Television have been looking for a smoking gun in the State Investment Board, wondering if North Dakota is being well served by consultants that have worked for the state for two decades.

Because the financial agreements between the board and the consultants are exempt from the North Dakota open records law, the search has been slow and cumbersome.

One of the major complaints about state investments has been the failure to invest some of this $8 largesse in North Dakota. In its report, KX has cited surveys which indicate broad public support for investing more of the money within the state.

One of the fact finders, according to KX reports, has focused attention on some of the out-of-state investments which, to ordinary citizens, look like malfeasance, if not worse.

KX reports that Fargo attorney Luke Heck found investments in 89 countries, including 37 different investments in China, many of which are “linked to the Chinese Communist Party.”

When the state hires investment advisers, the board keeps looking at the return on investment. That being the case, the consultants look to investments that yield the greatest return. At one time, we fired an underperforming money manager who was earning a petty 26% yield. Other managers were earning more.

This motive is in conflict with the complaint of failure to invest in North Dakota. The consultants can’t produce strong performance records with investments in North Dakota. That’s a truth we find hard to accept.

KX asked Rep. Keith Kempenich, R-Bowman, who had chaired the Legacy Fund Advisory Board about Callan’s influence with the board. Kempenich noted that the board vote on issues was almost always 11-0.

The reason votes are unanimous is because no one on the board has the expertise to second guess others in the complex game of investing. As a board member, I had no qualifications when it came to actual investing. We always went along with our home investment adviser who worked in unison with the out-of-state consultants.

If there are questions about the secondary relationships of Callan that may be adverse to the interests of North Dakota, the board ought to hire other qualified investors to scan the investment program with emphasis on integrity if that is the concern.

There is strong sentiment in North Dakota is for using the Legacy Fund for in-state investments.

Because of this sentiment, the board ought to leave $7 billion for yield investment but carve out $1 billion for a in-state venture capital program with expectations different than high yields. We can afford it.

North Dakota communities have had a lot of experience with cities and counties underwriting failures – which are bound to happen in the venture game. The $1 billion for in-state ventures must be structured so that professional judgment controls decisions and not local politics or politicians.

Omdahl is a former N.D. lieutenant governor and retired University of North Dakota political science teacher. Email [email protected]

This column does not necessarily reflect the opinion of The Forum's editorial board nor Forum ownership.