The Time Bomb that is North Carolina: $30 Billion of Unfunded Liabilities

North Carolina government is…facing a chronic fiscal disease, a structural imbalance between spending promises and projected revenues that far exceeds $30 billion.

 

…The main component of this long-term fiscal imbalance is health insurance for teachers and government employees…it appears that some combination of increased taxpayer and employee contributions totaling $1.2 billion will be needed over the next two fiscal years to finance the current level of benefit.

 

Not scary enough? Try this on for size.

 

In the ensuing years, as tens of thousands of current teachers and other government employees start to retire, they’ll be filing claims against the state’s promise of supplemental health insurance for retirees.

 

Unfortunately, past governors and state legislatures haven’t deemed it necessary to accumulate financial assets with which to finance this obligation, referred to in the accounting literature as an Other Post Employment Benefit (OPEB).

 

 

…if the General Assembly began taking the state’s unfunded liability seriously this year, that would widen the expected FY 2009-10 deficit from 14 percent to 20 percent.

 

…The most-recent hard estimate, from December 2007, puts the state liability at $29 billion. By now, it’s almost certainly above $30 billion – so you can bump that “20 percent true budget deficit” up another point or two.

 

…We have tens of billions of dollars of long-term needs in basic state infrastructure such as roads, bridges, and prisons.

 

…North Carolina political leaders have created more programs, hired more employees, and assumed more fiscal obligations than can be financed at current tax rates.

 

…The size and scope of our government must be brought into line with reality.

 

http://www.carolinajournal.com/jhdailyjournal/display_jhdailyjournal.html?id=5247