Moody’s Investors Service revises the State of North Dakota’s outlook from negative to stable

Friday, December 21, 2018 - 3:30pm

BISMARCK, N.D. – Moody’s Investor Service has revised the State of North Dakota’s issuer rating outlook from negative to stable, citing the state’s progress toward a structurally balanced budget and replenishing reserves – two priorities outlined in Gov. Doug Burgum’s executive budget recommendation presented to the Legislature earlier this month.

The stable outlook “reflects the state’s progress towards structural balance and rapid restoration of reserves as the economy and revenues continue to recover from the 2016 energy recession,” Moody’s stated in a news release.

“Recent declines in oil prices will likely result in some economic and revenue volatility, however the state’s energy economy and financial reserves are well-positioned to weather some short-term disruptions at this time,” the release stated.

Moody’s also affirmed the state’s Aa1 issuer rating, saying it “reflects the state’s substantial remaining reserves after recession-driven draw-downs, very low debt and fixed costs, and its history of sound budget management, including its recent progress towards restoring structural balance and budget stabilization funds.”

The state’s Budget Stabilization Fund was drained last biennium, from $573 million down to $38 million, to cover a massive revenue shortfall. Burgum’s executive budget recommendation restores structural balance by ensuring that ongoing expenditures don’t exceed ongoing revenues, while also proposing to transfer $315 million to the Budget Stabilization Fund to help fill the rainy-day fund to the maximum allowed.

Moody’s warns that “failure to restore structural balance and replenish the budget stabilization fund as currently planned” could lead to a downgrade in the issuer rating. An issuer rating is an opinion on the ability of an entity to meet its financial obligations.