State News

Annual study warns against authorizing new NC debt

Posted February 1, 2011 6:19 p.m. EST
Updated February 2, 2011 2:22 p.m. EST

— A panel led by State Treasurer Janet Cowell says North Carolina government has no extra room to authorize new debt if it wants to keep its top credit rating because of a poor revenue situation.

Cowell's office released on Tuesday the annual Debt Affordability Study. The committee said the state has exhausted its ability to borrow money through mid-2012 on things like building construction and through mid-2013 for transportation projects.

Last year's study only suggested a little extra debt capacity was available.

The report said officials took into account a pair of temporary taxes set to expire this year and the end of federal stimulus money.

“Without a broadening of the tax base and more stable revenue stream, we will find ourselves in a situation that offers even less budgetary flexibility and creates the need for continued tough decisions to be made by our lawmakers,” Cowell said in a statement.

The limit doesn't prevent $1.6 billion in borrowing already approved but with debt yet to be issued.

The study also identified three liabilities that state lawmakers need to address: the unfunded portion of retiree health care benefits, which totaled $32.8 billion at the end of last year; the $2.15 billion to the U.S. Treasury for funds borrowed to make unemployment benefit payments; and the failure to fund the annual required contribution rate to the state Retirement Systems that will result in an increase to the state’s net pension obligation.