State Budget Practice Report Cards and Budget Resource Guide
North Dakota joined Alabama, Missouri, and New Hampshire in posting a D-minus average for budget forecasting, the lowest possible mark, for fiscal 2017 through 2019. It failed to use consensus revenue estimating and did not provide multiyear forecasts for revenues or expenditures beyond the two-year budget. North Dakota also lacked an explanation of the reasoning behind revenue growth projections.
The state did little better in legacy costs, registering a D average for the category, which covers public worker pensions and other unemployment benefits (OPEB), principally health care. North Dakota’s annual contributions for its small OPEB liability met actuarial recommendations, but its contribution rate for pensions—7.12 percent of payroll—consistently fell short of what actuaries determined was needed to reach full funding over thirty years. In 2018, North Dakota’s pensions were 65 percent funded, 5 percentage points below the total for all states.
North Dakota’s performance improved in the remaining categories. The state is the second-biggest crude oil producer, after Texas, and its tax revenues are vulnerable to swings in prices for petroleum, natural gas, and coal. The state has protected itself with a sound policy for reserve funds and earned an A average in the category. North Dakota smooths out revenue fluctuations through its Legacy Fund, which collects 30 percent of total tax revenues on oil and gas production and transfers investment earnings to the general fund at the end of each biennium. At that time, any general fund surpluses over $65 million are transferred to the Budget Stabilization Fund to help replenish the reserve and deal with revenue volatility. North Dakota’s reserve policies are aligned with the best practices cited in the recent Volcker Alliance working paper, Rainy Day Fund Strategies: A Call to Action.
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 found here contain grades of the state's budgetary practices during the fiscal years of 2017 through 2019. Each state received marks in five critical categories, based on their adherence to best practices in several key budgeting indicators. The five categories covered methods used to achieve budgetary balance as well as how budgets and other financial information are disclosed to the public.
States received grades of A to D-minus (there are no “failed states”) for their procedures in estimating revenues and expenditures; their use of one-time actions to balance budgets; how they oversee and use rainy day funds and other fiscal reserves; the adequacy of their funding of public worker retirement and other postemployment benefits; and the quality of transparency of budget and related financial information. The grades are based on research conducted by public finance and budgeting professors and students at eight US schools of public administration or policy. The universities’ research efforts were augmented by Volcker Alliance staff, data consultants at Municipal Market Analytics, and special project consultants Katherine Barrett and Richard Greene.
State Budget Sources
State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses is a resource published by the Volcker Alliance designed to help public officials, policy advocates, journalists, academics, and concerned citizens fully understand the critical fiscal decisions that governors and legislators must make. The guide includes the links below to budgets for this state as well as legislative analyses of budget bills and treasurers’ or comptrollers’ monthly state cash-flow statements; capital spending plans; reports on public-worker pension funding and returns; and reports by local and national fiscal research organizations, bond rating firms, and associations of state fiscal and finance officials.