Piecemeal budget bills have been a savior to North Carolina’s credit rating during its four-month-long budget stalemate, according to America business rating agency Moody’s.
Gov. Roy Cooper's and lawmakers' failure to agree on a full budget could be a credit negative, but the alternate flow of funds through stopgap bills has kept the state’s top credit rating intact.
“The lack of a budget for more than four months reflects governance weakness and is credit negative,” Moody's analysts wrote. “Although the state ended fiscal 2019 with a budgetary surplus of nearly $900 million, the lack of agreement on budget priorities amid a time of economic expansion and healthy revenue growth does not augur well for budgeting and strong governance during times of economic and revenue stagnation or declines.”
Cooper vetoed the legislature's spending plan in late June, citing differences in partisan priorities. Cooper wanted the state to expand Medicaid to more residents and give teachers higher pay raises. After a lack of compromise across party lines, Republicans opted to pass mini-budget bills instead. Moody's experts say the move has kept the state afloat during the unresolved conflict.
“A continuing appropriation and the passage of several standalone measures alleviate most spending limitations at this time,” the analysts wrote.
North Carolina is one of few states that has been assigned a AAA rating by Moody's for its creditworthiness. It is the highest ranking issued by the agency.
Some Republicans reacted to the report, blaming Cooper for stalling the bill.
“We knew from the beginning that the governor's Medicaid ultimatum would negatively impact the state and now our worries have come to fruition,” Sen. Harry Brown, R-Onslow, said. “Even though the governor has blocked compromise after compromise, a continuing resolution has allowed the state to continue spending and avoid a government shutdown.”
However, Moody's also state patching a budget together as North Carolina did can lead to adverse effects for local governments. Counties who depend on the state to match funding for projects might have to improvise or delay projects until the full spending plan is approved.
“Counties routinely supplement the local BOEs’ operating budgets and are required by state law to provide for their capital needs; therefore, some BOEs may ask counties for additional funds,” Moody’s analysts wrote.
Some educational institutions might also need to make tough decisions, according to Moody’s.
The University of North Carolina Pembroke Chancellor Robin Cummings on Thursday reportedly told a UNC System committee that the budget impasse is “hurting" the school.
The spending bill allocated $15 million more for the N.C. Promise tuition scholarships, which would help with the growing student population at UNC Pembroke and other affiliated schools. Cummings told the Daily Advance that the school’s operations greatly depend on the money.
“Something needs to be done sooner than later,” Cummings said. “We need to get this budget passed.”
But with the approaching holidays, Cummings may have to wait until January before the budget battle is resolved.