North Dakota

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How Does North Dakota Compare to Other States?

North Dakota ranks 2nd among US states for its fiscal health, based on its fiscal solvency in five separate categories.

North Dakota’s exceptionally strong fiscal performance in FY 2013 was due to high revenues from the oil and gas industry. Strong performance in this sector contributed to very high levels of cash solvency and excess revenues relative to spending during the fiscal year. On a long-run basis, North Dakota’s position was also strong, with a robust level of excess assets and long-term liabilities small relative to total assets. At more than $7 billion, unfunded pension obligations were three times larger than the state estimate, representing about 20 percent of state personal income. 

See “Ranking the States by Fiscal Condition” for a complete explanation of the methodology used to calculate North Dakota’s fiscal health rankings.

1. North Dakota ranks 7th in terms of cash solvency.

Cash solvency measures whether a state has enough cash to cover its short-term bills, which include accounts payable, vouchers, warrants, and short-term debt. North Dakota’s cash position was very strong in FY 2013. The state had three to five times the amount of cash needed to cover short-term liabilities, far higher than the national average.

 

Cash ratio

           Quick ratio

       Current ratio

North Dakota

3.64

4.37

5.67

National average

2.23

3.02

3.37

2. North Dakota ranks 2nd in terms of budget solvency.

Budget solvency measures whether a state can cover its fiscal year spending out of current revenues. Did it run a shortfall during the year? North Dakota’s operating ratio in FY 2013 indicates that revenues exceeded expenses by 51 percent in FY 2013, and the state showed a surplus of $4,540 per capita.

 

Operating ratio

Surplus (deficit) per capita

North Dakota

1.51

$4,540

National average

1.07

$473

3. North Dakota ranks 10th in terms of long-run solvency.

Long-run solvency measures whether a state has a hedge against large long-term liabilities. Are there enough assets available to cushion the state from potential shocks or long-term fiscal risks? On a long-run basis, North Dakota’s picture was very strong in FY 2013. After paying for its debts, the state had excess assets on hand representing 56 percent of total assets. (Net assets are those left over after the government has paid its debts. They are a subset of total assets, which also include capital and government buildings. The net asset ratio measures the total of restricted and unrestricted assets, or net assets, as a portion of total assets.) Long-term liabilities in the state were low, accounting for 14 percent of total assets. But long-term liabilities per capita are higher than the national average at $3,935. 

 

Net asset ratio

Long-term liability ratio

Long-term liability per capita

North Dakota

0.56

0.14

$3,935

National average

0.03

0.40

$2,768

4. North Dakota ranks 49th in terms of service-level solvency.

Service-level solvency measures how high taxes, revenues, and spending are when compared to state personal income. Do states have enough “fiscal slack”? If spending commitments demand more revenues, are states in a good position to increase taxes without harming the economy? Is spending high or low relative to the tax base? Service-level solvency is the only area in which North Dakota had a poor ranking. Total taxes as a percent of total personal income were double the national average at 13 percent. In addition to robust tax revenues, other sources of revenue accounted for 24 percent of total state personal income, largely driven by the state’s oil industry. Expenses did not match revenues but accounted for 16 percent of total personal income, indicating the state was taking in a high level of revenues but not committing all of it to immediate spending. 

 

Tax to income ratio

Revenues to income ratio

Expenses to income ratio

North Dakota

0.13

0.24

0.16

National average

0.06

0.14

0.13

5. North Dakota Ranks 14th in Terms of Trust Fund Solvency.

Trust fund solvency measures how much debt a state has. How large are unfunded pension liabilities, other postemployment benefits (OPEB) liabilities, and state debt compared to the state personal income? North Dakota’s unfunded pension liability accounted for 20 percent of state personal income. (Pension benefits are recalculated based on a discount rate of 3.38 percent to account for the government’s guarantee to pay employees earned benefits.) But the state carried very little OPEB and average amount of debt relative to personal income at 4 percent.   

 

Pension to income ratio

OPEB to income ratio

Debt to income ratio

North Dakota

0.20

0.00

0.04

National average

0.29

0.04

0.04

 State debt

State debt is calculated from each state’s Comprehensive Annual Financial Report. Total primary government debt in North Dakota amounted to $1.59 billion in FY 2013, or 4 percent of state income, which was close to the national average.

General obligation bonds

Total primary government debt

State personal income

Ratio of debt to state personal income

Total primary debt per capita

North Dakota

$0.18 billion

$1.59 billion

$38.47 billion

4.1%

$2,266

National average

$6.08 billion

$12.60 billion

$282.05 billion

4.0%

$1,824

Pension liability 

Pension liability is calculated from each state’s pension actuarial reports. At $7.70 billion on a guaranteed basis, North Dakota’s unfunded pension liability was more than three times larger than the state’s estimate.

Unfunded pension liability

Funded ratio

Market value of unfunded liability (risk-adjusted discount rate)

Market value of funded liability ratio

North Dakota

$2.28 billion

61%

$7.70 billion

32%

National average

$19.85 billion

70%

$78.79 billion

40%

OPEB liability 

OPEB liability is calculated from each state’s Comprehensive Annual Financial Report. OPEB liabilities amounted to $0.12 billion in North Dakota, a relatively small amount, though the funded status is unclear from reports. 

 

Total unfunded OPEB liability

Funded ratio

North Dakota

$0.12 billion

n/a

National average

$10.84 billion

11%

n/a: not available.