North Dakota

State Budget Practice Report Cards and Budget Resource Guide

Oil-rich North Dakota collected the full range of scores across the five budgetary categories evaluated by the Volcker Alliance for fiscal 2015 through 2017. While the state earned an A average—the highest possible—for its handling of reserve funds, it received a D-minus—the lowest possible grade—in budget forecasting.

North Dakota’s top performance in reserve funds is particularly important because of its dependence on volatile oil and gas revenues. The state not only set aside a sizable budget stabilization fund when fracking dollars began rolling in but also established polices on the use of the reserve and how it is to be replenished, a best practice. The stabilization fund is stocked by transferring cash at the end of each biennium from any general fund accounts exceeding $65 million. If there is not enough in the general fund to meet the target, the stabilization fund must retain its earnings until the reserve reaches the equivalent of 9.5 percent of general fund appropriations.

Its poor showing in budget forecasting reflects North Dakota’s failure to use consensus revenue forecasts and multiyear expenditure and revenue forecasts, as well as its lack of a reasonable, detailed rationale to support revenue growth projection at the time of the initial budget. The state, which for the most part avoided one-time measures to achieve budgetary balance, got an overall A in budget maneuvers. It received a C in transparency for not disclosing budgetary costs of tax expenditures or replacement costs of depreciated infrastructure.

Download Printable State Report Card

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 presented here are taken from the 2017 Volcker Alliance report, Truth and Integrity in State Budgeting: What Is the Reality? which proposes a set of best practices for policymakers. For those wishing to gain greater insight into state fiscal issues, the accompanying budget resource guide is derived from the Alliance publication State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses (2016). 

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