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Published July 29, 2011, 03:53 PM

ND Agencies Awaiting Result of US Debt Duel

State agency administrators said Friday they were uncertain about the impact on North Dakota's government operations should the federal government default on its debt next week.

By: Dale Wetzel, Associated Press

BISMARCK, N.D. (AP) — State agency administrators said Friday they were uncertain about the impact on North Dakota's government operations should the federal government default on its debt next week.

About one-third of North Dakota's $9.9 billion, two-year budget for state government is provided by federal funds, according to Pam Sharp, the state budget director. The biggest sums are for road projects and Medicaid, a state and federal health assistance program for the poor and elderly.

Sharp said the number of variables that could arise from a federal debt default were so numerous that it made it almost impossible to plan for their potential consequences.

"It just depends on how things shake out," Sharp said. "I don't even know what they might quit sending at this point."

Republicans and Democrats in Congress and President Barack Obama are bickering about the terms of a deal that would allow an increase in the federal government's borrowing limit, which is now $14.3 trillion and is expected to be reached Tuesday.

As the debate in Washington intensified, states tried to figure out what to do to prepare in case a deal was not reached.

Brenda Weisz, the chief financial officer for North Dakota's Department of Human Services, said she had received little information from federal agencies the North Dakota department works with about the financial impact of a default.

"I think once they (federal agencies) know more, they will let us know more," Weisz said.

Bob Fode, the state Department of Transportation's director for transportation programs, said he believed a default would not stop the flow of federal highway aid for road construction and repair unless the problem went unresolved past Sept. 30, which is the end of the federal budget year.

"Right now, we don't see any impact," Fode said. Talks with Congress about a new federal transportation bill, he said, "has been more on our forefront than the debt ceiling."

Eric Hardmeyer, president of the state-owned Bank of North Dakota, said a default would have little if any effect on the bank's access to funds. The main source of those funds is the Federal Reserve, not U.S. government debt, he said.

Hardmeyer said he believed the possibility of a default was remote, but that it was more likely that credit agencies will lower their ratings on government bonds. That, in turn, could lead to higher interest rates.

"If there is no compromise reached," Hardmeyer said, "I think they're going to see very quickly that the markets will demand that something happen."

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