North Dakota

State Budget Practice Report Cards and Budget Resource Guide

North Dakota was one of only three states to get an average of D-minus, the lowest grade possible, in budget forecasting for fiscal 2016 through 2018 (Alabama and Missouri were the others). The state does not provide multiyear revenue or expenditure forecasts, lacks an explanation of its rationale for revenue growth projections, and fails to use consensus revenue estimates. Revenue estimates are left exclusively to the governor, although the legislature can develop and use its own forecasts when considering the budget. 

Despite an oil drilling boom that has topped up North Dakota’s coffers, the state received a D average in legacy costs. Its public employee pension had only 63.8 percent of the assets needed to meet promised obligations as of 2017, and the state fell short of making actuarially determined contributions for the program in all three years studied. 

North Dakota earned a C average in transparency. Like most other states, it failed to disclose deferred infrastructure replacement costs. It also has limited disclosure of tax expenditures. A broader and more detailed view of tax exemptions and credits might let policymakers see the degree to which budgetary revenues are being forgone to attract or retain businesses. 

In contrast, the state averaged an A in reserve funds. North Dakota ties its goals for reserves to revenue volatility, an important factor given its dependence on oil production.

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To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.

The report cards presented here are taken from the 2018 Volcker Alliance report, Truth and Integrity in State Budgeting: Preventing the Next Fiscal Crisis which proposes a set of best practices for policymakers. For those wishing to gain greater insight into state fiscal issues, the accompanying budget resource guide is derived from the Alliance publication State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses (2016). 

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