How reliant is North Dakota on federal money?

All states, including North Dakota, get a substantial amount of funding from the federal government. Yet as the federal government battles worsening fiscal woes, particularly growing national debt, this reliance on federal money could spell trouble for state budgets.

In the recently passed One Big Beautiful Bill (OBBB), Congress enacted provisions that reduce federal spending by over $1 trillion. Efforts to cut spending at the national level will likely continue, especially given growing entitlement spending and persistent deficits.

The OBBB is a wake-up call for states to get their budgets in order and reduce their dependence on Washington, D.C, before the crunch becomes unavoidable.

So, how reliant is North Dakota’s budget on the federal government?

While North Dakota gets a relatively smaller share of its funding from the federal government, federal money still makes up a substantial portion of state spending. Moreover, North Dakota is heavily reliant on tax revenue from extractive industries, which tends to be volatile, increasing the risk of fiscal instability.

How North Dakota compares

According to the National Association of State Budget Officers (NASBO), North Dakota spent $8.4 billion in the 2024 fiscal year. Federal funds accounted for 31 percent of total spending. This is below the U.S. average share (34 percent) and median state share (35 percent).

Figure 1: Federal Share of Total State Spending by State, FY 2024

North Dakota fares relatively well on Medicaid spending as well. In 2024, federal funds constituted 63 percent of North Dakota’s Medicaid spending. This is below both the U.S. average share (64 percent) and the median state share (66 percent).

Figure 2: Federal Share of Total Medicaid Spending by State, FY 2024

Risks remain

Despite ranking relatively well, federal money still accounts for a significant portion of North Dakota’s Spending. Therefore, changes in federal fiscal policy — particularly enacted and potential spending cuts — increase the risk for fiscal shortfalls. Efforts are needed to reduce federal dependence.

Furthermore, North Dakota is one of a few states that disproportionately depend on tax revenue from extractive industries. In the 2024 fiscal year, for instance, severance taxes made up over half of all general fund revenues. In most other states, income and sales taxes were the dominant source of revenue.

Figure 3: State Government Tax Revenues by Source, 2024

Tax revenues from extractive industries are volatile, which, in addition to changes in federal fiscal policy, adds an extra layer of uncertainty for North Dakota’s tax revenue base.