There’s an old joke North Dakota Republican legislators tell about their worst nightmare: They’re walking down the Great Hall in the Capitol heading for the cafeteria on their short lunch break and they see Secretary of State Al Jaeger coming toward them. Knowing they’re going to get stuck in a boring 15-minute conversation, they pretend they forgot something back at their desk and turn around to get away, and there comes State Treasurer Kelly Schmidt from the other direction. Kiss that lunch break good-bye.
Let’s skip over Al Jaeger today and talk about the North Dakota State Treasurer’s office and its current occupant, State Treasurer Kelly Schmidt. Schmidt’s done something that appears to be a major embarrassment for herself, her office and North Dakota Republicans, who control all of North Dakota state government, including the Legislature, all executive branch elected and appointed offices and all of the state government’s boards and commissions: She’s misplaced $137 million.
There were some news reports during the past week that a little-known appointed official has blown a whistle on that big financial screw-up, affecting funding for the state’s primary and secondary education system.
Republicans are scrambling, throwing out the term “ambiguity in the law” and introducing a delayed bill in the Legislature that will have a hearing this week to try to sort out the mess.
The whistle-blower is State Land Commissioner Jodi Smith, Gov. Doug Burgum’s pick to be State Land commissioner for the State Land Board when he took office in 2017. Her agency, the Department of Trust Lands, is responsible for managing the state’s permanent educational trust funds and making sure that all the money collected from lands given to the state at statehood are used to fund education in the state in perpetuity.
That money includes taxes on oil extracted from state lands. After taking office last year, Smith discovered a discrepancy while poking through the agency’s files and financial statements. She kept digging to see if what she thought she saw was actually what she did see. It was. About $137 million dollars was missing from the school funds.
How’d that happen? Smith says State Treasurer Kelly Schmidt failed to make transfers required by law of petroleum extraction tax revenues to various trust funds, including those for public schools.
Schmidt gave the money to the wrong funds. It looks like much of it ended up in the state’s General Fund, which pays for all of the state’s general government operations, instead of where it should have gone, the Common Schools Trust Fund, which funds the state’s primary and secondary education system.
Schmidt and legislative leaders, who appear to be trying to cover up for her, are saying the law is “ambiguous.” But the bill they’ve introduced and will be heard this week is pretty unambiguous. It says yes, that money has gone to the wrong place. It needs to go to the schools. It’s been going somewhere else for almost 10 years.
Smith uncovered something that never got discovered by her predecessor, Lance Gaebe. Gaebe was a big old cowboy who took pretty good care of the land but probably wasn’t so good with numbers, unlike Smith, who comes from a financial background.
Burgum, meanwhile, is standing behind his new appointee, saying the money needs to be paid back — he “would support restoring those affected constitutional funds as soon as possible.” He’s the only one saying that. Legislators are shivering in the wake of a $137 hit on the general fund, and Treasurer Schmidt says once the legislators clean up the law, so it’s not so “ambiguous,” she’ll start sending the money to the right place.
This isn’t Schmidt’s first big screw-up. In the 2009 legislative session, Dickinson State University was given $9 million to build a new library, contingent on the state’s revenue collections being at least $25 million ahead of forecast at the end of the calendar year. The money was to be distributed to the university after Jan. 1, 2010, if the revenue projections looked good. Sure enough, with great fanfare, Gov. John Hoeven, who was beginning a campaign for the U.S. Senate and looking for all kinds of ways to get good publicity, announced with great fanfare at a press conference in early January of 2010 that revenues were more than $33 million ahead of projections, and Dickinson State was getting a new library!
And it might have, except for a giant screw-up by Kelly Schmidt. Now, most North Dakotans don’t really know what a state treasurer does. They know what the Rotary Club treasurer does, and the Ladies Aid treasurer — they collect the dues and pay the bills. Well, that’s kind of what a state treasurer does too, I think.
In North Dakota, the state treasurer’s job mostly consists of walking around the Capitol every morning and picking up all the money that comes in for taxes and fees and permits and fines and stuff, then going out for lunch, and then coming back to the office and sorting the money out into little piles — a pile for the Highway Department to build roads, a pile for Kirsten Baesler to pay the teachers, a pile for Game and Fish to stock walleyes in Lake Sakakawea, a pile for Job Service to send out unemployment checks, a pile for the governor to pay all those state employees in the Capitol, and so on — and finally, at the end of the day, to fill out deposit slips and drop it all off at the Bank of North Dakota on the way home.
Well, back at the end of 2009, when Schmidt was sorting those little piles of money on her desk and filling out deposit slips, she absent-mindedly wrote down a $12 million deposit instead of a $1.2 million deposit. Just a decimal point out of place. A little $10 million mistake. So it turns out the funds for the DSU Library weren’t there. When she discovered it a month later, she had to call Hoeven, and Hoeven had to call Dickinson State and say, “Sorry, no library.”
Hoeven said he’d try to get it in the budget for the 2011 session, but by the time that came around, he was gone to the U.S. Senate and new Gov. Jack Dalrymple didn’t have much taste for libraries in western North Dakota. Students at Dickinson State are still going to that library the state built for them in 1960.
I was only being a little facetious when I described the state treasurer’s job earlier. If you’ve never been to Kelly Schmidt’ website, you need to go look. It is a hoot.
On the “About” page it lists the things the Treasurer’s office does:
- Cash Management.
- Tax Collections and Distribution
With a short paragraph explaining each one.
But right under that is this sentence:
“Unlike some State Treasurers, North Dakota’s Office of State Treasurer DOES NOT:
- Function as the State’s Bank.
- Manage the State’s Retirement Funds.
- Manage the State’s Permanent Funds.
- Manage the State’s 529 College Savings Plan.
Administer or collect income, gross receipts (sales), or property taxes.
- Administer Unclaimed Property.
I swear, I have never seen a government website that has a list of the things the agency DOESN’T do!
And the list is longer than the things it DOES.
About 15 years ago, my friend, Dean Meyer, a former state senator from out west, decided he wanted to run for state treasurer. I asked him why he would want to leave his wonderful cattle ranch in western North Dakota to move to Bismarck to work in the Capitol building. His response was something like this: “Oh, I wouldn’t have to do that. The state treasurer doesn’t really DO anything, so I wouldn’t have to show up for work. I’ve always wanted a job where I got paid for not coming to work.”
Well, Dean picked the wrong year to run — he lost to Kelly Schmidt, and Democrats got pretty much wiped out in 2004, although Dean got the most votes of any of the Democrats who lost. And he wasn’t too far from right when he said there wasn’t much to do at the office back then.
Back in the 1970s when I was a young buckaroo working for the North Dakota Democrats, one of my jobs was to drive then-State Treasurer Walter Christensen around the state raising money for the Democratic-NPL Party and its candidates. Walt was a tall, silver-haired, stately looking gentleman with a big booming voice and a charming personality, and he had an able-bodied young fellow named Robert Hanson to look after the office for him so he could spend his time doing politics — in fact, Hanson succeeded him, appointed by Gov. Art Link when Walt died unexpectedly halfway through his second term — so we hit the road.
I’ll never forget one night in Dickinson, when a couple of hundred of the Democratic faithful were gathered in the banquet room of the German Hungarian Club, and Walt was the speaker. We used to elect Democrats in western North Dakota back then — those were the legislative days of Rick Maixner and John Maher and Doug Nordby and John Gengler and Bill Lardy and Jerry Waldera and even Dean Meyer — and there was money to be raised to keep them in office.
Well, when Walt was done speaking, he said “OK, I want Don Beckert and Bob Locket (pointing to two of the biggest guys in the room) to go back there and stand in front of the door. We need to raise $10,000 here tonight, and nobody’s getting out that door until young Mr. Fuglie there has that much in front of him on the table.”
Well, Beckert, who was the district highway engineer in Dickinson for the North Dakota Highway Department at the time — those were political appointments in those days — jumped up and said, “Let me throw in my hundred bucks first” and handed me a check for $100, which he already written out. (I think he and Walt already had that worked out in advance.) And then a steady stream of loyal Democrats made their way up to my table and wrote out checks, and we had more than $10,000 in less than half an hour, and Walt smiled all the way back to Bismarck.
He repeated that scene all over North Dakota during his time as state treasurer, although I didn’t drive him all the time. He was the best I ever saw at it. He never said it out loud, but he was thinking “This is how I pay back my party for getting me this job that pays pretty well and doesn’t require much work.”
I don’t know if Kelly Schmidt is any better at fund raising than she is at bookkeeping, but I hope Burgum, who chairs the State Land Board, which oversees the Department of Trust Lands, from whose trust funds $137 million is missing, can find a way to get that money back she’s misplaced. Get it back into our school funds.
And then I hope the North Dakota Democrats can find someone to replace Kelly Schmidt in the 2020 election. Democrats need to start rebuilding and make this a two-party state again. The Treasurer’s office would be a good place to start. I wonder if Walt Christensen has any grandkids?