By Johnny Kampis
Carolina Journal News Service
North Carolina’s Debt Affordability Advisory Committee says the state should set aside $100 million a year to help the state pension systems remain solvent.
A draft released Wednesday, Feb. 24, of the committee’s 2021 debt affordability study also calls for North Carolina to maintain its 4% borrowing cap.
The committee said more money is needed to support post-employment benefits, including pensions and health care. Officials said the state’s pension systems show a $12.1 billion shortfall, while the State Health Plan is underfunded by $27.7 billion.
The committee said the state should put $100 million annually into the Unfunded Liability Solvency Reserve through fiscal 2025 to help lower that number.
That may sound like a lot of money, but it’s all relative in the world of government pension debt. Bill Bergman research director for Truth in Accounting, a Chicago-based fiscal watchdog, told Carolina Journal the North Carolina debt is a drop in the bucket in juxtaposition to states like Illinois.
“Compared to jurisdictions like my own, where we have $140 billion more in unfunded pension debt despite being a similarly sized state, we are jealous of taxpayers in North Carolina,” he said.
The Center Square noted that North Carolina is one of just 13 states that enjoys the AAA rating – the highest – from all three credit rating agencies. Higher ratings yield lower interest rates and save money for taxpayers when states borrow funds.
North Carolina’s low interest rates have helped the state retire debt in recent years. The committee anticipates the debt will continue to decline for at least the next four years.
Bergman said the numbers are “part of a larger chain of indicators that North Carolina has been a more responsible state.” North Carolina ranked 15th in TIA’s annual Financial State of the States report released in September.
“They really do walk the walk on balancing their budget,” Bergman said.
The debt advisory committee estimates the state has an additional debt capacity of $3.2 billion from the general fund this fiscal year, with another $437 million available next fiscal year.
Gov. Roy Cooper wants North Carolina voters to consider a $4.3 billion general obligation bond in November that would support school construction, infrastructure upgrades and various other items on his spending wish list. Cooper has also suggested a $988 million limited obligation bond to fund health care and the COVID-19 pandemic response.