RALEIGH – Remember back to a few short weeks ago when the Republicans in the North Carolina General Assembly were proposing a constitutional amendment to cap personal income tax rates. Democrats on Jones Street tied themselves in knots trying to sow fear of credit downgrades and revenue shortfalls. They just couldn’t stand to allow voters a chance to limit their ability to raise taxes.
Well, the ratings firms have spoken, and they do not foresee the possible lowering of the constitutional limit on personal income taxes as having any negative effects on the Old North State’s credit outlook.
Actually, all of the ratings firms just gave our State ‘AAA’ ratings. Again.
Republican State Treasurer Dale Folwell announced Wednesday that all three major national bond rating agencies have re-affirmed the state’s “AAA” bond rating, noting the state’s strong economy, growing reserves and conservative fiscal management. That makes North Carolina one of only 13 states that have an “AAA” rating from all major rating agencies.
The ratings were assigned in preparation for the second issuance of voter-approved Connect NC Bonds totaling $2 billion for universities, community colleges, local parks, infrastructure and other projects.
The use of the approved $2 billion in bond has been at a trickle, with the first issuance of $200 million occurred in 2016. This issuance will be for $400 million and is expected to be offered on July 18.
While that’s not exactly consistent with the picture of pressing need for these bonds the lawmakers painted, the stellar bond rating means the interest on the debt will be as cheap as possible.
“Having these ‘AAA’ ratings ensures that we can borrow money at the lowest possible rates, which results in the state having more buying power,” said Treasurer Folwell inhis announcement. “Ultimately, the credit for these ratings goes to the taxpayers of North Carolina and the North Carolina General Assembly for their strong fiscal management.”
But if you believed the chicken little rhetoric from Democrats over the past several years of tax cuts and now potential lower tax caps, you’d think the State’s fiscal house would have long since collapsed. Instead it’s foundation has grown stronger.
They sang the same song when debating the lowering of the personal tax cap from 10 percent to 7 percent via constitutional amendment, saying it endangered out top bond rating and imperiled future spending priorities.
The ratings firms addressed that possibility specifically, and – surprise, surprise – the Democrats were wrong again. The agencies all affirmed the ratings with knowledge that the General Assembly has placed a constitutional amendment on next November’s ballot capping the state’s income tax rate at no higher than 7 percent from its current 10 percent limitation.
S&P Global Ratings noted in their summary that they “… do not expect voter approval of the reduction to have a rating impact.”
Among the other highlights from the firms’ reports were applauding the Treasurer and legislature for the establishment of the first-ever Solvency Fund to address the state’s nearly $50 billion in health care and pension IOU’s; noting the state’s strong, conservative fiscal management; and, referencing North Carolina’s exceptionally strong ability to close budget gaps during economic downturns.
The latter is something previous Democrat-led legislatures were exceptionally BAD at, racking up billions in deficits and debts during the Great Recession.
So the next time you hear a Democrat assert that the Republicans’ tax cut policies endanger the State’s credit and future revenues – and there will be a ‘next time’ – rest assured that it really means North Carolina is heading in the right direction fiscally.