(The Center Square) – Taxpayers in North Carolina have more buying power through state government on the strength of an AAA long-term rating and an AA+ appropriation-backed rating.
S&P Global Ratings affirmed the placements recently. Republican Treasurer Dale Folwell said, “Ultimately, the credit for these ratings goes to the taxpayers of North Carolina and the North Carolina General Assembly for their strong fiscal management.”
North Carolina is one of only 13 states with a AAA rating from all three major national bond rating agencies. Moody’s Investors Service and Fitch Ratings are the other two of the big three.
S&P, in a release, said tax reforms – led by the Republican majorities of the Legislature in the last 15 years – are pivotal to the state’s successful outlook.
“We expect the state will handle potential court-mandated additional education spending in a structurally balanced way,” the S&P said in a release. “The outlook also reflects the state’s commitment to strong fiscal management of the budget, reserve balances, debt, and retirement liabilities. Furthermore, we anticipate that the underlying strengths and structural features of North Carolina’s economy will support growth over the long term.”
From the 1998 midterms through the 2008 general election, North Carolinians elected a trifecta of Democrats’ and their policies – majorities in the Senate and House of Representatives, and the party in the governor’s office. At the 2010 midterms, Republicans won both chambers and started enacting legislation aimed at changing the budget deficit of between $800 million and $1.2 billion.
In less than 15 years, the turnaround was roughly $6 billion to a surplus of $5 billion that has since – and will be again – tapped for $900 million to assist in Hurricane Helene recovery.
“We believe North Carolina’s credit profile benefits from strong economic growth, state’s ability to manage revenues to support expenditure mandates, well-defined financial management policies, and a commitment to maintaining balanced biennial budgets and preservation of very strong reserves,” said S&P Global Ratings credit analyst Joe Pezzimenti.
The letter grades indicate an entity’s credit worthiness. AAA is the highest, D is the lowest.
Examples of appropriation-backed obligations are Build NC bonds and any issued by the state’s Turnpike Authority.
Authority to manage sale and delivery of all state and local debt, and the monitoring of repayment of state and local government debt, rests with the Department of State Treasurer’s State and Local Government Finance Division. Folwell has served two four-year terms as treasurer and was unsuccessful bidding for governor in the Republican primary; Brad Briner won on Election Day over Democrat Wesley Harris and takes office in January.
The S&P said the general obligation rating reflects its view of:
“• Historically strong economic growth trends supported by diverse employment sectors.
“• History of prudent fiscal management – this includes making difficult budget decisions to restore fiscal balance when necessary, as well as managing surpluses when they occur, to retain structural budget balance, and building and replenishing reserves drawn on to mitigate impacts of severe weather events.
“• Low-to-moderate debt burden, with above average amortization and state borrowing subject to debt affordability guidelines, which we believe is an important credit factor for a growing state.
“• Well-funded pension system and progress in addressing other postemployment benefits liabilities.
“• Institutional framework that supports the predictability of the state’s budgeting and operations, in our view.”
