North Carolina remains in a strong financial position, with strong borrowing capacity over the next 10 years, thanks in part to reduced overall debt service payments with the refunding of bonds, said State Treasurer’s Office at a recent meeting on debt.
The state’s Debt Affordability Advisory Committee (DAAC), chaired by Briner, voted at its meeting on Tuesday to approve a study that concluded the state has sufficient debt capacity to borrow nearly $2 billion in each of the next 10 years for capital projects and $155 million annually for transportation projects.
The DAAC, which writes the annual debt affordability report, as required by state law, provides analysis to the governor and General Assembly, with an overview of the state’s debt load and borrowing capacity of the General, Highway, and Highway Trust funds.
The debt capacity is directly related to the state’s creditworthiness, which continues to be rated AAA, the highest mark issued by the three major credit rating agencies, including Moody’s and S&P. North Carolina remains one of only a handful of groups having the AAA rating and comparative debt ratios.
The study determined the General Fund debt capacity is $11.68 billion in 2026, or $1.93 billion annually if spread equally over the next 10 years. The Highway Trust Fund’s debt capacity is $920 million in 2026, or $155 million if spread evenly over the next 10 years.
Between October and November, the state refunded $480.5 million in limited obligation bonds and general obligation bonds, as well as tendered a portion of the callable bonds, resulting in a savings of $23.1 million, and reduced overall debt service payments, saving taxpayers money.
If no further debt is authorized, the state’s General Fund debt service will decline more than 85% over the next 10 years and will be eliminated by June 30, 2039.
“It is startling if you look at some of the financial history over the last 20 years in the state, what caused this committee to come to pass,” Briner said during the meeting on Tuesday. “It was real and was a concern for the state, and we’re so far from there as a financial matter today that I think it is also sensible from that perspective.”
In an October interview with Carolina Journal, the treasurer said that, unlike states with a lot of debt, North Carolina isn’t borrowing money and paying significant amounts of interest on it to inflate its cash on hand. North Carolina is also growing, as opposed to a lot of other states, and that growth, he says, is an answer to a lot of problems.
DAAC is staffed by the Debt Management Section of the Department of State Treasurer’s State and Local Government Finance Division.
