In a rare Saturday work session, state legislators hammered out a tentative agreement on a new school funding formula and moved forward on property tax relief and renovation of the state prison.

Their sudden progress on three of the session's marquee issues comes with next Friday's constitutionally mandated adjournment deadline looming large. Legislative leaders are hoping Saturday's work helps them adjourn earlier next week.

"We have had a really good weekend so far," said House Majority Leader Rick Berg, R-Fargo.

New education funding formula

After more than a week of debate and compromise, negotiators from the House and Senate settled on a final version of a bill that changes the way the state doles out aid to local school districts.

The 36-page bill is extremely complex, setting up a mathematical formula that uses factors like relative property wealth, school size and number of special education students to determine how much money each district gets. But its overall effect is quite simple: a $90 million increase in state aid to school districts and a complete overhaul of how it's distributed among them.

Sponsors say the bill accomplishes its goal of establishing an equitable distribution formula in the face of a lawsuit from school districts that feel shortchanged by the current distribution formula.

"I think it will help ensure that all students have a more uniform level of educational opportunity," said state Sen. Tim Flakoll, R-Fargo.

State Superintendent Wayne Sanstead said he was "very pleased and very grateful."

"I think this means districts can now address what they know needs doing," Sanstead said. "They couldn't do that before because they didn't have the property tax wealth to do it with."

Under the current system, state aid money is essentially distributed based on enrollment. Many other items, such as money to help pay teacher salaries and equity payments to especially poor districts, are currently figured outside of the formula.

Rep. RaeAnn Kelsch, R-Mandan, said the new version increases equity by plugging almost all of these factors into a central formula, which is designed to fairly allocate anything that's plugged into it.

Kelsch, who chairs the House Education Committee, said legislators had to "think outside the box," completely scraping the old formula to achieve equity.

A key part is a transition provision that protects schools from the formula's radical change by guaranteeing them at least a 3.5 percent increase over the next two years, she said.

As lawmakers debated the bill over the last week, the most contentious issue before them was how the formula should treat oil and gas tax revenue in areas that have such wealth. Under the current system, this additional wealth is not considered at all.

House members wanted to consider the money like any other tax revenue, saying the formula needed to include everything to be fair. Senate members thought the money should be considered at 50 percent of the rate.

This factor is very important because it can dramatically alter how wealthy a district is considered under the formula, which thus effects how much state aid it receives.

After much discussion, legislators reached an agreement whereby the money would count at 60 percent in the first year and 70 percent the next.

But North Dakota's oil and gas counties aren't pleased with the compromise. Brad Bekkedahl, president of the North Dakota Oil and Gas Producing Counties, said the tax revenue is meant to be in lieu of the counties' ability to assess property taxes on oil drilling wells.

"We feel to some degree that this was a negative step for our western rural school districts," Bekkedahl said.

The bill will be up for consideration by the full House and Senate later this week.

Property taxes

Legislators met throughout the day on Saturday attempting to reach a final compromise on the much-talked-about property tax rebate plan. Even though they failed to reach a final agreement, they amended the plan to allay many concerns that have kept it from passing until now.

Lawmakers removed provisions that required county auditors to collect and submit a bevy of tax data to their residents and the state tax department. Auditors complained that doing so would be too expensive.

They also expressed their intention to remove a portion of the law that limited the rebates to North Dakota citizens. Many legislators argued that this part was unconstitutional.

"I think we have taken out a lot of the worst issues in terms of administering it," said state Sen. Connie Triplett, a Grand Forks Democrat who was part of the negotiations. "It's getting better."

Even so, legislators failed to reach a compromise on the main issue of how much money the state should spend on property tax relief and how big of a rebate taxpayers should get.

House Republicans wanted to limit the property tax cut to $80 million, saying that money was needed in other areas of the budget.

"We're just down to the point where, unfortunately, it seems our spending has gotten to the limit," said Rep. Wes Belter, R-Leonard.

Others wanted at least $100 million in property tax relief, saying the amount each taxpayer receives needs to be significant enough to make a difference to people's finances.

"I understand there is other spending going on here but I question why it has to be at the expense of property tax payers seeking relief," said Sen. Dwight Cook, R-Mandan.

Saturday's negotiations ended with an entirely new idea offered by Cook. His proposal calls for a credit on every property tax owner's income tax statement that is equal to 10 percent of what he or should pays in property taxes.

Legislators plan to meet today to continue their work in seeking a compromise.

A new state prison

Also on Saturday, lawmakers reached a compromise that brings together many plans to either renovate the state penitentiary or build an entirely new one. Earlier this session, Gov. John Hoeven proposed $42 million to renovate the prison and House Republicans called for more than $80 million to build a new one.

The compromise plan calls for $41 million to be set aside in something called the state penitentiary land fund. A separate bill, to be negotiated Monday, will provide instructions on what to do with the fund.

Possibilities include a renovation or an architectural study to determine the most economically and functionally feasible option going forward.

"As of today, it still hasn't been decided," Sen. Aaron Krauter, D-Regent, said Saturday. "The money is now in the fund and appropriated for any building that would be done."