(The Center Square) – North Carolina's overall fiscal health did not improve during the onset of the COVID-19 pandemic, a new report shows.
Despite revenue growth fueled by federal aid, financial watchdog Truth in Accounting (TIA) said the state has not properly funded its pension and health care plan, which places a debt burden of $4.3 billion on future taxpayers.
Based on the state's fiscal year 2020 audited financial report, the state had $42 billion to pay $46 billion worth of bills, resulting in its shortfall at the onset of the pandemic, TIA's annual Financial State of the States report showed. As a result, each North Carolina taxpayer has a debt burden of $1,400.
North Carolina ranked 14th out of 50 states for fiscal health and budget management, and it earned a C grade in the TIA analysis. Any government with a taxpayer burden between $0 and $4,900 received a C grade. A dozen other states received a C grade.
North Carolina's Office of State Budget and Management and the General Assembly's Fiscal Research Division estimated in June the state would collect $60.4 billion in revenue over the next two years, reflecting a $6.5 billion increase over previous estimates.
North Carolina's retirement systems make up the ninth-largest public pension fund in the country and had an estimated value of nearly $122.8 billion as of Aug. 27.
According to the systems' website, more than 300,000 state retirees are receiving a total of more than $500 million in pension and disability benefits. North Carolina's pension systems are underfunded by $12 billion, and the State Health Plan is underfunded by nearly $28 billion, according to its 2021 debt affordability study published in March.
"North Carolina's financial problems stem mostly from unfunded retirement obligations that accumulated over the years. The state had only set aside 86 cents for every dollar of promised pension benefits and 8 cents for every dollar of promised retiree health care benefits," TIA said.
Despite receiving assistance from the federal government, the majority of states' finances worsened at the beginning of the pandemic, TIA said. TIA found all 50 states combined reported being $1.5 trillion in debt and most of the debt was a result of unfunded pensions. At the end of the 2020 fiscal year, the report shows that 38 states did not have enough money to pay their bills.
The average taxpayer burden across the 50 states was $9,300 for fiscal year 2020, $2,000 worse than the previous year.
The top three indebted states were Connecticut (per-taxpayer burden of $62,500), New Jersey ($58,300) and Illinois ($57,000).
The most fiscally healthy states were Alaska (per-taxpayer surplus of $55,100), North Dakota ($39,200) and Wyoming ($19,500).