A report by a Virginia organization showing North Dakota's government deep in debt paints the wrong picture of the state's financial situation, according to the head of the state's budget office.
State Budget Solutions, a nonprofit organization advocating for fundamental reform of state budgets, released its third annual state debt report indicating that North Dakota's total state debt is more than $6.1 billion.
"Although North Dakota has a lower budget debt than most states, it is still in trouble and no amount of budget gimmicks, political posturing or hiding bills will fix the massive debt North Dakota faces," said Bob Williams, president of State Budget Solutions, in releasing the report.
However, Williams conceded that North Dakota is well off compared to other states, and with its revenues could easily overcome the weaknesses found in the report.
Pam Sharp, director of the North Dakota Office of Management and Budget, challenged the way the organization calculated debt. It included items handled through the state, such as revenue bonds, that are not obligations owed by the state, she said.
By including revenue bonds, the report found North Dakota has $1.9 billion in general debt. Sharp said actual general debt is less than $1 billion, which represents debt on large developments such as buildings, roads and water projects.
"The biggest problem with this report is that they report that the state has $4 billion of pension debt," she said. "The $4 billion isn't even close."
There are various ways to calculate pension debt. North Dakota uses standard government accounting methods, while State Budget Solutions uses a less accepted calculation method that produces the highest debt figure, she said.
Williams took issue with the pension accounting standards that state governments are directed to use because the standards leave too many risk assumptions open to manipulation.
"If any private company attempted to do what states are mandated to do, they would be put in jail," he said.
Williams also noted that revenue bonds carry the potential for state obligation if there is default by the city or other original payer. But he said the greater concern nationally and in the state centers on pension risk. Although North Dakota is in financially good shape, using some of its budget surplus to shore up its pension fund would better protect the state against a pension crisis, he said.
North Dakota had the second lowest state debt in the State Budget Solutions report after Vermont, with $5.8 billion. The report listed the nation's total state debt at $4.19 trillion.
State Budget Solutions calculated debt using each state's regular debt, fiscal year 2013 budget gap, outstanding unemployment trust fund loans, unfunded other post employment benefit liabilities and the state's unfunded pension liability.