RALEIGH, N.C. (AP) - A committee led by North Carolina’s new state treasurer voted Wednesday to recommend lawmakers set aside money annually to tackle a future bill for state government retiree health care and to ensure pensioners are paid at promised levels for decades to come.
Treasurer Dale Folwell, a Republican elected in November, is spearheading an effort to begin trimming down unfunded health care and pension obligations of nearly $38 billion. Folwell has been sounding the alarm on the health care liability, which comprises most of the total, since his days in the General Assembly.
There is no immediate danger of retirees broadly losing health coverage or failing to get monthly retiree checks. The state retirement system, valued at about $90 billion, remains among the healthiest government pension programs in the country.
But Folwell said these long-term issues can’t be kicked down the road anymore. Other states are faced with other liability issues.
“Our fiduciary responsibility is to preserve and strengthen what we have,” he told the committee, adding that “we have the opportunity to lead the nation on this subject, on this issue, at this time.”
Folwell’s office said bond-rating agencies are looking closer at these liabilities when grading the quality of debt governments want to issue. North Carolina is one of 12 states with the highest ratings from the three top agencies. The triple-A rating keeps borrowing costs low.
A majority on the panel backed a proposal - which still would require General Assembly approval to implement - that envisions initially putting $153 million in a special fund next year to help meet the liability.
A 10-year model presented to committee members has future contributions pegged to a formula based on the state’s ability to issue debt prudently and state revenues. Annual contributions would largely be flat through 2020 and then increase substantially into the next decade, reaching $683 million in 2026.
Some committee members voted against the recommendation. Although not against the idea, they were concerned the projected fund contributions could make it difficult to address more immediate spending needs, such as for education.
The recommendation, included in the Debt Affordability Advisory Committee’s annual report, also projected the state could authorize more than $1 billion in additional debt during the next fiscal year and still remain below self-imposed borrowing limits.
The additional debt capacity is above and beyond the $2 billion in debt that voters statewide approved in March 2016. Two-thirds of the bond issue’s proceeds would go to new buildings or repairs and renovations at all University of North Carolina system and community college campuses.
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