July 11, 2017

#2 | Ranking the States by Fiscal Condition: North Dakota

Summary

On the basis of its fiscal solvency in five separate categories, North Dakota is ranked 2nd among the US states for its fiscal health. North Dakota maintained this high ranking despite the adverse effects of decreased oil prices on the state’s finances. On a short-run basis, North Dakota has between 4.91 and 7.48 times the cash needed to cover short-term obligations. Revenues exceed expenses by 27 percent, and net position improved by $2,810 per capita in FY 2015. On a long-run basis, net assets are 58 percent of total assets after debts have been paid. Long-term liabilities are 13 percent of total assets, or $4,418 per capita. Total primary government debt is $1.73 billion, or 4.2 percent of state personal income. Unfunded pension obligations, on a guaranteed-to-be-paid basis, are $9.75 billion, or 24 percent of state personal income. North Dakota’s service-level solvency metrics highlight the state’s high level of taxes, revenues, and spending relative to state income—the state may be building up unsustainable levels of spending.

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  • 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 ranks 6th.)
  • Budget solvency measures whether a state can cover its fiscal year spending using current revenues. Did it run a shortfall during the year? (North Dakota ranks 1st.)
  • Long-run solvency measures whether a state has a hedge against large long-term liabilities. Are enough assets available to cushion the state from potential shocks or long-term fiscal risks? (North Dakota ranks 9th.)
  • 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? (North Dakota ranks 50th.)
  • Trust fund solvency measures how much debt a state has. How large are unfunded pension liabilities and OPEB liabilities compared to the state personal income? (North Dakota ranks 4th.)

For a complete explanation of the methodology used to calculate North Dakota's fiscal health rankings, download the full paper and the dataset at mercatus.org/statefiscalrankings

To read all our work on North Dakota, go to mercatus.org/states/northdakota.