Affordability Advisory Committee Recommends New Policy to Address Unfunded
RALEIGH, N.C. – State Treasurer Dale R.
Folwell, CPA announced today the results of the 2017 Debt Affordability Study,
advising the Governor and the General Assembly on the estimated debt capacity
of the General and Transportation Funds for the upcoming 10 fiscal years.
The annual study, approved by the Debt
Affordability Advisory Committee, provides analysis of the impact of future
debt issuance on the state’s fiscal position. In addition to the analysis, the
study offers several policy recommendations required to maintain the state’s
longstanding history of conservative debt management.
For the first time, the primary recommendation
of this year’s report suggests significant additional money be put toward North
Carolina’s pension and Other Post-Employment Benefits (OPEB) obligations that
represent retired employees’ health benefits. The state currently has unfunded
pension and OPEB obligations totaling at least $38 billion.
Under this new proposal, the Committee
recommends that the targeted debt limit ratio be raised from 4 percent to 4.5
percent of general tax revenues, allowing for debt capacity in the General Fund, after placing funds in trust for the purpose
of funding the pension and OPEB liabilities. The result is General Fund debt
capacity of approximately $1.268 billion in the current fiscal year or just
over $180 million a year for the next 10 years. The combined debt capacity of
Transportation Funds (Highway Fund and the Highway Trust Fund) is approximately $1.364 billion
for the current fiscal year.
“As Treasurer, I have pledged to preserve and
protect the state’s AAA bond rating,” said Treasurer Folwell. “The
recommendations in this study are a necessary recognition of a changing fiscal
landscape. Even as the General Assembly has fully funded the pension, we have
witnessed the unfunded health care and pension liabilities of our state
continue to grow. Deliberate, gradual action is required to address this issue
and cannot wait another year. This committee didn’t create these liabilities,
we discovered them. With this action, we are taking a step towards solving the
problem. North Carolina is certainly not alone on this issue but we have the
unique opportunity to lead the nation and make a generational difference for
The 2017 Debt Affordability Study was prepared
by the staff of the State and Local Government Finance Division of the
Department of State Treasurer and approved by the Debt Affordability Advisory
Committee, which was created by the General Assembly in 2004 and is chaired by
Other committee members are Ronald Penny, Acting
Secretary of Revenue; Linda Combs, State Controller; Charles Perusse, State Budget
Director; Beth Wood, State Auditor; Frank Aikmus, Senate Appointee; Bradford
Briner, Senate Appointee; Cecil T. Turner, House Appointee; and Eugene
Chianelli, House Appointee.
the 2017 Debt Affordability Study here.
The Department of State Treasurer’s State and Local
Government Finance Division handles the sale and delivery of all
state and local debt and monitors the repayment of state and local government debt. More information can be found