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North Dakota’s huge budget reserves rank 2nd in the nation

A Pew study found that North Dakota's rainy day fund would keep state government going for 115 days, but a legislative leader cautions that state budgets must last for 730 days.

Photo: Rep. Jeff Delzer (R-Underwood) John Hageman photo
North Dakota Republican Rep. Jeff Delzer chairs a meeting of the House Appropriations Committee at the state Capitol on March 14, 2019.
Forum News Service file photo
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BISMARCK — North Dakota’s coffers are bulging, due largely to a rebound in oil prices and state officials’ conservative stewardship of the budget.

North Dakota’s financial reserves are so hefty, in fact, that they rank second-highest in the nation, according to an analysis by the Pew Trust.

Pew's comparison of relative financial reserves among the states used two measures of the size of each state’s rainy day fund, known formally as the budget stabilization fund.

North Dakota’s rainy day fund would be enough to run state government for 115.7 days, the Pew analysis found, using figures for the end of each state’s 2021 fiscal year. Wyoming ranked first, with enough rainy day money to last 300.8 days.

The 50-state median was 34.4 days. Minnesota’s rainy day reserves would last 42.7 days, South Dakota’s 41.7.

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If total reserve balances are included, the states could pay their bills a bit longer: 289.3 days in North Dakota, behind Wyoming’s 300.8 days, both far beyond the 50-state median, 85.1 days. Minnesota’s reserves would last 59.7 days, South Dakota’s 58.3.

North Dakota’s bulging reserves might seem to provide a secure cushion, but Rep. Jeff Delzer, R-Underwood, chairman of the House Appropriations Committee, said it’s important to remember that the state has relied on its reserves in recent years.

The state’s budget stabilization fund had a balance of $742.3 million as of the end of March, when Joe Morrissette, director of the Office of Management and Budget, briefed legislators. Another reserve fund, the strategic investment and improvement fund, used to pay for infrastructure projects, has a balance of $650.8 million.

“A good share of that fund is obligated,” Delzer said, referring to the strategic investment and improvement fund. The fund has been helpful in balancing the budget in lean years, he said.

“One hundred fifteen days sounds like a lot,” he said, referring to the number of days the rainy day fund could operate the state government, but pointed out a biennial budget is for 730 days, and the state is still early in the 2021-23 budget.

In 2015, faced with plummeting oil prices, the state was forced to use a budget reduction process, even with the budget stabilization fund, which can be up to 15% of the general fund, the state-financed portion of the budget, Delzer said.

As for what to do with its ample reserves when the North Dakota Legislature convenes in 2023, “I can’t speak for the whole legislature,” but Delzer said careful budgeting is still prudent, given high inflation and economic uncertainty.

“The upcoming session is going to be challenging,” he said. “The perception is we have a lot of money,” so spending requests will come pouring in.

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burgum_budget.jpg
Gov. Doug Burgum speaks to state agency leaders about budget requests at the North Dakota Capitol on Thursday, May 5, 2022.
Jeremy Turley / Forum News Service

In his budget guidance for the upcoming 2023-25 biennium, Gov. Doug Burgum called for agencies to base their budget requests on their current 2021-23 appropriation, subtracting one-time appropriations and continuing salary increases and new programs authorized by the Legislature.

So far this biennium, revenues are running 13%, or $200 million, above forecast. “Hopefully, the revenues keep coming in over what we project,” Delzer said. He called the strong reserves “a credit to the state.”

Burgum believes the state’s ample reserves would enable the state to make additional “strategic investments” in the upcoming budget.

“North Dakota’s strong reserves and strategic use of federal funding allowed the state to provide historic tax relief and make significant investments in infrastructure, education, economic development, cybersecurity, behavioral health and other priorities for the current 2021-23 biennium,” Mike Nowatzki, Burgum’s spokesman, said in a statement.

“The governor is optimistic that the ongoing healthy financial reserves and better-than-expected general fund revenues will have the state well-positioned for additional strategic investments in the next two-year budget cycle, while still taking a conservative approach to budgeting and looking for ways to make state government more efficient and effective,” Nowatzki said.

States use reserves and balances to deal with budgetary uncertainty, budget gaps during downturns and unforeseen emergencies, including natural disasters.

Rainy day funds grew in more than two-thirds of the states in fiscal year 2021, according to Pew, citing figures reported by the National Association of State Budget Officers.

Collectively, states piled up their biggest financial cushion on record, growing their rainy day funds by $37.7 billion, or about 50% above the previous year, the Pew report said.

Patrick Springer first joined The Forum in 1985. He covers a wide range of subjects including health care, energy and population trends. Email address: pspringer@forumcomm.com
Phone: 701-367-5294
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