North Dakota tops state finances with $21 billion surplus

North Dakota has claimed the top position in the 2026 Financial State of the States report, ending fiscal year 2025 with a $21 billion surplus. This financial cushion places the state ahead of its peers in managing public obligations, according to an analysis by Truth in Accounting. The organization calculated that North Dakota holds the highest Taxpayer Surplus in the country at $72,300. This figure represents each taxpayer's share of the state's surplus under the group's methodology, rather than a direct cash payment to residents.

The report highlights a sharp divide in American state finances, noting that 24 of the 50 states do not have enough available assets to cover their financial obligations. North Dakota's standing was supported by its Legacy Fund, a state investment vehicle built with oil tax revenue. While tax revenues from oil, gas, and coal declined amid lower energy prices, the report states that strong investment earnings and federal grant revenue helped offset those drops.

Alaska, Wyoming, Utah, and Tennessee followed North Dakota in the rankings. These five states recorded taxpayer surpluses ranging from $11,400 in Tennessee to the $72,300 peak in North Dakota. In contrast, New Jersey ranked last with a $162.3 billion shortfall. Truth in Accounting translates this gap into a $45,800 Taxpayer Burden, the highest in the nation. Connecticut, Illinois, Massachusetts, and California rounded out the bottom five states, with taxpayer burdens ranging from $16,000 in California to $45,800 in New Jersey.

Long-term retirement obligations remain a significant source of pressure on state finances. The report indicates that across the country, states held $775 billion in unfunded pension liabilities and $490 billion in unfunded retiree health care obligations in fiscal 2025. Despite these shortfalls, most states showed financial improvement in 2025. Strong investment returns boosted pension assets and helped reduce unfunded pension obligations. However, Truth in Accounting cautioned that these gains can reverse when markets fall.

States with stronger balance sheets have more room to weather economic downturns, maintain public services, and meet retirement obligations. Conversely, states carrying large unfunded debts face tougher choices over taxes, spending, and borrowing when revenues decline.