GUEST POST: DOUG BURGUM - Facing New Economic Reality in North Dakota: Fed Data Shows N.D. as One of Worst-Performing States

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The Federal Reserve Bank of Philadelphia for decades has tracked the economic performance of each state in the U.S. The measurements used are dispassionate economic statistics from the Bureau of Labor Statistics, the Bureau of Economic Analysis, and other sources.

Based on the Fed’s recent December 2015 report, 41 states have growing economies, two states have stable economies, and seven states have shrinking economies. It is not good news for North Dakota.

It should come as no surprise that among the seven states facing economic downturns, the majority have economies tied to the price of oil. The two states facing the largest economic downturns are North Dakota and Wyoming (see graphic). North Dakota faces a double whammy due to the low prices of agriculture commodities.

In listening to and speaking with citizens across the state, it is clear that the leaders and participants in our energy and agriculture industries understand the tough times we are in.

Last week, for the first time, a North Dakota governor uttered the words, “we are facing a $1.1 billion shortfall” in tax revenue. We are truly moving into unchartered territory in terms of the size and scale of the state government’s financial challenges.

Governor Dalrymple understands this and ordered 4.05% budget cuts, the largest by dollar size, $245 million, and percentage in recent history. And yet these cuts covered only 20% of the state government’s revenue shortfall. To cover the remaining $800 million, two additional sources were tapped. First, our $300 million general fund ending balance was taken to zero. The second source of cash was the state’s Budget Stabilization Fund or “rainy day” fund. That fund had taken years to grow to a total of $575 million, and last week, the rainy day arrived. Or more accurately, a downpour of historic proportions arrived, and $500 million of the $575 million was depleted in a single afternoon.

In parallel to these events, the most-often heard phrase on the campaign trail from nomination-seeking politicians includes citing a prior survey that listed North Dakota as the “best-run state in the nation” for four years running. Number two on this “best-run” list? Wyoming. Much of the historic economic data that propelled oil-producing states to these top honors was tied to price of oil and the resulting boom.

North Dakota and Wyoming now face a new recognition: Being atop the Federal Reserve’s list of worst-performing state economies.

In response to this budgetary crisis, conventional campaign wisdom appears to be that “we have seen hard times before,” with the implications being to head to the root cellar and wait for the economic storm to pass. This typical political response reinforces a false belief that North Dakota’s economic outcomes need to forever remain out of our control.

For North Dakota to reach its full potential, we must, and we can, build a diversified economy and create a more streamlined state government. We need to unhinge our economy – and our state tax revenue and spending structure – from forces beyond our control.

Recently North Dakota was listed 40th on the Bloomberg U.S. Innovation Index, with Bloomberg Business saying the 40th ranking, “illustrates what happens when economic growth is concentrated in one industry.” An entirely new interconnected global economy is emerging. This new economy is built around innovation, entrepreneurship, and rapid advancements in technology. Improving our innovation stature is essential to successfully navigating the economy of the future.

I believe in North Dakota. I believe we can move from good to exceptional. I believe in our people, in our resources, and in our potential as individuals and as a state. My commitment to this belief is reflected in my lifelong work to build companies in North Dakota that attract and retain the talent and capital needed to compete globally and live well locally. I know what North Dakotans can accomplish when we work together. We can build world-class companies. We can create world-changing products. We can fix our state budget. It all starts with the belief that we truly can shape our own destiny.

Doug Burgum is seeking the gubernatorial nomination at the republican convention in Fargo on April 1-3. He will run in the statewide primary on June 14, 2016. To learn more, visit Doug Burgum for North Dakota at