Despite 125% Growth In Spending, North Dakota Ranks 2nd In “Budget Health”

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Written By:
Rob Port

Sep 28, 2011
2:56pm

I’ve criticized North Dakota’s political leaders consistently for overspending, so some might think that this news would undermine that criticism. I don’t think so.

It’s easy to have a healthy budget when an oil boom is pouring tax revenues into state coffers. Earlier today Tax Commissioner Cory Fong announced that state sales tax collections had grown 30% in the 2nd quarter of this year, going up over $1 billion. That’s an astounding number, and exactly why North Dakota can rank 2nd in “Budget Health” even as the state ranks 4th in the nation in spending growth:

BISMARCK, ND – State Budget Solutions, a nonprofit organization advocating for fundamental reform of state budgets, has released an analysis of budget trends during the past decade for every state and found that North Dakota was among the best in the country.

North Dakota ranked #2 out of all 50 states in total fund expenditure, which is the total of the state expenditures in a given fiscal year encompassing all state funds. The state had a 5.11% surplus in general funds, and a 14.39% surplus in total funds. These funds include those for specific purposes, such as trust funds, bond funds, or transportation budgets, and are distinct from the general fund budget, which tracks just a portion of state expenditures. While what exactly is included in the general fund varies by state, it often includes education, human services, healthcare, etc. …

But that revenue growth has also come with growth in spending. According to numbers from State Budget Solutions, North Dakota saw the 4th largest increase in per-capita general fund spending in the nation coming in behind only Alabama, Wyoming and New York.

It’s easy to have a healthy budget when tax revenues are growing at an almost exponential rate. But, as I’ve repeated often, when growing tax revenues are predicated on a single industry – in this case mostly oil – there’s danger.

If oil revenues plateau, or drop off, North Dakota is going to be in dire fiscal straits. Because we’ve grown the state government beyond what North Dakotans can pay for without huge windfalls from the oil tax.