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Study ranks ND fourth in fiscal health, but use of 2014 data doesn’t reflect oil slump

BISMARCK -Two Republicans campaigning to become the party's nominee for governor in November disagreed about the relevance of a study released Wednesday that ranks North Dakota's financial health as higher than all but three other states.

BISMARCK –Two Republicans campaigning to become the party’s nominee for governor in November disagreed about the relevance of a study released Wednesday that ranks North Dakota’s financial health as higher than all but three other states.

The study completed for the Mercatus Center at George Mason University ranked each state’s financial well-being based on 2014 data for short- and long-term debt and other key obligations such as unfunded pensions and healthcare benefits.

After ranking No. 2 in last year’s study, North Dakota slipped two spots. Alaska topped this year’s rankings, followed by Nebraska, Wyoming, North Dakota and South Dakota.

The study’s authors, senior research fellow Eileen Norcross and research assistant Olivia Gonzalez, noted in a summary that the top states owed some success to unpredictable revenue sources.

Since the data was from fiscal year 2014, “it appears as though these states are very well off, but declining oil prices and the budget crises that are currently unfolding in Alaska and other oil-producing states highlight the danger of expanding revenue based on volatile revenue sources,” they wrote.

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Attorney General Wayne Stenehjem, the Republican Party’s endorsed candidate, called the No. 4 ranking “further good news” that affirms that state government wisely prepared for the downturn in oil and farm commodity prices by using one-time spending and setting aside reserves.

“I certainly don’t want to suggest we won’t have budget challenges. We will. But we’ll be able to handle those in the next session,” he said. “I think the message is the sky is not falling.”

His primary challenger, Fargo businessman Doug Burgum, downplayed the ranking as “an interesting piece of news that’s two years old.”

“It has absolutely no relevance on any decisions we would make,” he said, adding North Dakota would likely rank far lower based on current data and that the state needs a more responsive revenue forecasting system.

Sharply declining tax revenues prompted Gov. Jack Dalrymple to order about $245 million in budget cuts for most state agencies in February to help cover a $1.07 billion revenue shortfall projected for the 2015-17 biennium. Even with a lower revised forecast, state tax revenues so far this year have fallen $53.7 million, or 2.3 percent, short of projections through April.

The study ranked North Dakota at 4th in having enough cash to cover its short-term bills, 3rd in being able to cover fiscal year spending, 10th in being able to meet long-term commitments and 13th in trust fund solvency. The lone low mark was a 49th ranking in “service-level solvency,” which measures how high taxes, revenues and spending are when compared to state personal income and whether states have enough “fiscal slack” to raise taxes without hurting the economy if spending commitments demand more revenues.

Minnesota ranked 26th overall and Montana 10th in fiscal health.

The study can be found at  http://mercatus.org/statefiscalrankings/northdakota .

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