A Government that North Carolina can Afford | Eastern North Carolina Now

    Publisher's note: The author of this post is Joseph Coletti, who examines fiscal and tax policy for the John Locke Foundation.

    Each February, the State Treasurer's Debt Affordability Advisory Committee preempts the hopefulness of Groundhog Day with the publication of the annual Debt Affordability Study, the committee's reminder that state government resources are limited. The committee details how much debt state government has, whether it was approved by taxpayers, how it will be paid, how much it costs to pay the principal and interest, and how much more debt state government can afford for general purposes and transportation. This year's report adds details on the competing challenges even among prudent uses of state revenue.

    General Fund debt service is targeted at 4 percent or less; transportation debt can take up to 6 percent of combined Highway Fund and Highway Trust Fund revenue.committee has advocated raising the target for payments on state debt from 4 percent of General Fund revenue to 4.5 percent, still below the statutory cap of 4.75 percent. The committee would put roughly $200 million per year toward unfunded obligations for retiree pensions and health care benefits, which total at least $40.7 billion and use the additional debt capacity to fund a $1.5 billion general obligation bond.

    Net tax-supported General Fund debt totaled $4.7 billion in 2017, well below the previous peak of $6.2 billion in 2013. Tax-supported transportation debt adds another $870 million. State government has $608 million in highway debt based on federal funds and $237 million in guaranteed energy savings contracts. The N.C. Turnpike Authority also has $834 million in debt that is ultimately state government's responsibility. In all, that is $7.3 billion worth of state debt.

    Two legislative changes in the 2017 budget bill (Session Law 2017-57) affect the committee's recommendations. Beginning in 2021, new state employees will no longer qualify for state-provided health insurance after retirement. This change will not be seen in the unfunded liability for retiree health insurance until 2026 when those new workers would have vested in the system. The unfunded liability will continue to grow until then, but it puts a definite cap on the liability that can be accrued.

    On the other hand, the committee's goal of setting aside unused debt capacity was "circumvented" by the creation of a Pay-As-You-Go Capital and Infrastructure Fund. As the Debt Availability Study explains, the fund lays claim to "4% of the State's General Fund net tax revenues...to pay debt service (first priority) and then new State and UNC capital projects and repair and renovation projects." The new fund is designed to reduce or eliminate the need for new debt, but it takes money that the committee hoped to use for pensions and retiree health care. A 0.5 percent allocation of General Fund revenue would yield $115 million in the coming fiscal year, half of the $214 million expansion and a fraction of the full $1.9 billion (8 percent of General Fund revenue) already dedicated to this purpose for Fiscal Year 2018-19.

    These changes pile on existing fiscal challenges. If state government were to continue doing all the things it does the same way it does them, spending would grow faster than revenue is expected to increase. If state and federal tax and regulatory reforms do not spur faster economic growth, spending growth would need to remain near the post-2011 trend of 2.5 percent per year to keep the budget balanced.

    State government needs to set aside money for the next downturn, for future retiree health and pension benefits, and for the capital needs of state facilities. These needs compete with each other, as well as with program costs for education, health, public safety, and other government services in the General Fund. Just as transportation funding demands hard choices, so does the rest of government. Needs may be unlimited, but resources are. North Carolinians are still paying for past promises and outsized expectations.

    Unlike the Sir Walter Wally or Punxsutawney Phil, who are entertaining but bad meteorologists, the Debt Affordability Study does not make pleasant reading, but it is essential for charting a responsible fiscal course.
Go Back


Leave a Guest Comment

Your Name or Alias
Your Email Address ( your email address will not be published)
Enter Your Comment ( no code or urls allowed, text only please )




"Too Much Growth" Doesn't Cause Inflation John Locke Foundation Guest Editorial, Editorials, Op-Ed & Politics Media Push The Claim There Have Been 18 School Shootings In 2018. Here Are The Facts.


HbAD0

Latest Op-Ed & Politics

Be careful what you wish for, you may get it
Former President Donald Trump suggested this week that if he becomes president again, he might allow Prince Harry to be deported.
It's a New Year, which means it's time to make resolutions — even for prominent evangelical leaders. The Babylon Bee asked the following well-known figures in the faith what they hope to accomplish in 2024:
Vice President Kamala Harris will visit a Minnesota Planned Parenthood clinic, reportedly the first time a president or vice president has visited an abortion facility.
An eight-mile stretch of the Blue Ridge Parkway near Asheville has been temporarily closed due to a string of “human and bear interactions,” the National Parks Service announced.
University of Wisconsin tried to punish conservatives for the fact that liberals regularly commit crimes to silence opposition
most voters think EU officials not doing a good job on illegal immigration
Come from behind by GOP candidate is a blueprint to 2024

HbAD1

Biden spending and energy policies to blame
Tuberculosis carried by illegal invaders has already infected Texas cattle
Sen. Ted Cruz (R-TX) said this week that the only campaign promise President Joe Biden has delivered on as president is the complete dismantling of the U.S. southern border.
Hamas is reeling after losing two of their most cherished leaders on the same day: military commander Saleh al-Arouri, and Harvard President Claudine Gay.
President Joe Biden’s brother told the Internal Revenue Service that Hunter Biden told him he was in business with a “protege of President Xi,” referring to the leader of China, according to notes by an IRS investigator that were divulged during a congressional interview of Jim Biden.
Gov. Roy Cooper seeks a temporary restraining order to block a law changing the composition of the State Board of Elections.
X owner Elon Musk mocked a news segment from ABC News this week that promoted President Joe Biden’s talking points about the Democrat-led Senate’s failed border bill, which critics and many experts have said would make the situation on the border worse.
That’s the question Marguerite Roza of Georgetown University’s Edunomics Lab sought to answer in a recent webinar on the topic.
The University of Florida has fired all of its diversity, equity, and inclusion (DEI) employees and shut down its DEI office.

HbAD2

 
Back to Top