by Sarah Curry
Director of Fiscal Policy Studies
According to a new study by the Mercatus Center at George Mason University, North Carolina ranks 27th among the US states in fiscal health. This is based on fiscal solvency across five separate categories: cash solvency, budget solvency, long-run solvency, service-level solvency, and trust fund solvency. Here are the findings from the report. If you want to read more about North Carolina, click here. To read more about the entire report and the other states’ scores, click here.
North Carolina performed unevenly in FY 2013. Cash solvency was relatively weak, with the state holding about 80 percent of the most liquid cash needed to cover short-term bills. North Carolina ran a small surplus, and on a long-run basis, liabilities accounted for 22 percent of total revenues, far lower than the national average. Its trust funds were well funded compared to those in other states, putting North Carolina on a relatively sound basis. However, when calculating the state’s pension liabilities on a guaranteed-to-be-paid basis, total unfunded liabilities were more than $65 billion, with OPEB adding a further $23 million and total debt adding an additional $9 billion.
1. North Carolina ranks 42nd in terms of cash solvency. Cash solvency measures whether a state has enough cash to cover its short-term bills, which include accounts payable, vouchers, warrants, and short-term debt.
2. Budget solvency measures whether a state can cover its fiscal year spending out of current revenues. North Carolina ranks 18th in terms of budget solvency.
3. Long-run solvency measures whether a state has a hedge against large long-term liabilities. North Carolina ranks 24th in terms of long-run solvency.
4. Service-level solvency measures how high taxes, revenues, and spending are when compared to state personal income. North Carolina ranks 24th in terms of service-level solvency.
5. Trust fund solvency measures how much debt a state has. How large are unfunded pension liabilities, other postemployment benefits (OPEB) liabilities, and state debt compared to the state personal income?North Carolina ranks 9th in terms of trust fund solvency.