Weathering the Next Recession: How Prepared Is North Dakota?

  • Erick M. Elder

    Professor of Economics, University of Arkansas at Little Rock

Rainy day funds are a key tool that most US states use to help mitigate the fiscal stress caused by economic downturns that reduce state government revenue. States can use rainy day funds in combination with their general fund surpluses as a buffer against revenue declines. The chart below compares North Dakota’s available rainy day fund and general fund balances from fiscal year 2015 with what the state would need to weather recessions of varying degrees. North Dakota could weather a mild, average, or severe recession.

See “Weathering the Next Recession: How Prepared Are the 50 States?” for a complete explanation of the methodology used to calculate North Dakota’s recession preparedness. The data used in that report are from fiscal year 2014.

North Dakota

Based on its business cycle characteristics, North Dakota is amply prepared for an average recession if the state decided to rely on its combined rainy day fund and general fund balances rather than cutting spending or raising taxes. North Dakota is unique in that even during a severe economic downturn, the state is expected to maintain positive economic growth rather than experiencing an actual contraction. This is why the state’s chart displays zero dollars as the hypothetical amount needed to weather a mild, average, or even severe recession.