Debt advisory committee calls for $100M in support of North Carolina pensions


North Carolina's Debt Affordability Advisory Committee approved a draft Wednesday of its 2021 debt affordability study, which calls for maintaining the state's 4% borrowing cap and setting aside more funding for state pension systems.

The committee, chaired by State Treasurer Dale Folwell, monitors how much money the state can afford to borrow without damaging its credit rating.

North Carolina is one of 13 states with the highest bond rating possible from all three credit rating agencies. Its AAA rating keeps interest rates down and limits taxpayers' economic burden.

The committee said lawmakers should allocate $100 million to the Unfunded Liability Solvency Reserve every fiscal through fiscal year 2025 to support North Carolina's unfunded pension liabilities.

North Carolina's pension systems are underfunded by $12.1 billion, and the State Health Plan is underfunded by $27.7 billion, according to officials.

North Carolina's debt has declined over the past five years. As of June 30, the state had $8.1 billion in outstanding debt, of which about $5.2 billion is supported through the general fund or directly from transportation taxes. The state since has retired some of its debt because of low interest rates. The committee also expects debt to continue to decline over the next four years.

As for wiggle room, the advisory committee estimated the state has an available debt capacity of an additional $3.2 billion from the general fund in fiscal year 2021 and an additional $437 million from the general fund in fiscal year 2022. The number does not account for any funds that already have been authorized and are unissued for the fiscal year, officials said.

About 49% of the money North Carolina has borrowed supports higher education. Another 20% supports transportation, said Lewis Andrews, director of the treasurer's state debt division.

Appropriation committees started budget discussions this week and plan to meet over the next month to work out details of the state's spending plan for the next two fiscal years.

Gov. Roy Cooper recommended in his budget proposal placing a $4.3 billion General Obligation Bond on the November ballot to ask voters to support school construction, water and sewer infrastructure, affordable housing, community colleges and universities. He also recommended investing in a Limited Obligation Bond of $988 million for health care infrastructure and COVID-19 pandemic response.

The other committee members of the Debt Affordability Advisory Committee include State Auditor Beth Wood, Secretary of Revenue Ronald Penny, State Budget Director Charlie Perusse and State Controller Linda Combs. Frank Aikmus, vice president of Suntrust Bank; Bradford Briner, director of Real Assets Willett Advisors; attorney Eugene Chianelli Jr.; and accountant Donald Pomeroy II account for the public's membership. They have until March 1 to submit the report to Cooper. They plan to make technical changes before publishing the final draft.

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