by Joseph Coletti
Senior Fellow, Fiscal Studies, John Locke Foundation
Governor Cooper’s $3.9 billion bond proposal for schools and water systems is the fourth entry in the contest to use state government debt capacity. The State Capital and Infrastructure Fund (SCIF) already dedicates 4 percent of General Fund revenue to debt service and new capital projects. The Debt Affordability Advisory Commission recommended increasing the debt capacity to 4.5 percent of revenue, the statutory limit, and using $4.9 billion of that over the next decade to shrink unfunded liabilities for retiree health benefits and leaving $2.1 billion available for capital projects through new debt or the SCIF.
Budget Director Charlie Perusse at February’s Commission meeting suggested it would be possible to issue up to $10 billion in new bonds if the state redirected money from the unfunded obligations to debt service and offered $6 billion as a compromise between staff’s recommended $2 billion and his own projection. State Auditor Beth Wood and Revenue Secretary Ron Penny voted with Perusse in favor of paying less for unfunded retiree health benefits and more for capital projects, but his last-minute change did not pass.
In addition to the Commission’s recommendation to reduce unfunded liabilities and the Gov. Cooper’s bond proposal, the House is moving ahead a $1.9 billion bond package for schools and the Senate is leaning toward using a similar amount of money over ten years without incurring new debt. Both the Senate and House plans could be compatible with the Commission’s recommendation depending on what they would do for other state facilities.