Regarding questions about how the state can afford to pay for a $2 billion bond issue without a tax increase: Aggressive debt retirement, strong revenues and a conservative bond proposal well within the state’s credit capacity is why the Connect NC bond will not require a tax increase.
The Connect NC bond allocates $1.3 billion or 66 percent of the $2 billion bond issue to universities and community colleges, reflecting Gov. Pat McCrory’s commitment to education. The bond issue is being proposed because most major capital projects such as new educational buildings, particularly those at our universities and community colleges, cannot be paid out of the annual operating budget without a serious effect on students.
It has been 15 years since the last bond issue was authorized to update our state’s infrastructure, and since then North Carolina’s population has grown by 2 million. This growth has resulted in significant infrastructure needs from the mountains to the coast.
Think of North Carolina as a growing family. Most families take out a mortgage to pay for their houses. As the family grows, it needs a house with more bedrooms and bathrooms. If the family had to pay for a larger house with upfront cash, its ability to pay for other family needs would be severely restricted. So just as growing families would take out mortgages to pay for their houses as they use them, the Connect NC bond issue allows the state to pay over 20 or 25 years for assets that will last 50 years or more.
The Connect NC bond issue proposes taking on only half of the debt we can conservatively afford. A recent report by the state’s Debt Affordability Advisory Committee, a nonpartisan oversight committee, demonstrates that even with the issuance of the $2 billion Connect NC bond, North Carolina could comfortably borrow an additional $2 billion over the next 10 years and still keep its hard-earned AAA rating.
Therefore, North Carolina’s proposed $2 billion bond issue for infrastructure improvements when it has a credit line of over $4 billion is akin to the growing family opting for the modest house that meets its needs even when it could afford the house with the swimming pool.
Debt capacity is just one reason a tax increase won’t be needed. Another is the fast rate the state is paying off its current debt. North Carolina’s debt retirement is so aggressive that if voters approve the Connect NC bond issue, the state will still have less debt five years from now than it does today.
As stewards of the taxpayer purse, we owe it to our growing North Carolina family to invest during a time of historically low interest rates. It literally has never been less expensive to borrow. Our state has a long history of responsibly using bonds to pay for long-term infrastructure investments, and North Carolina is financially well-positioned to make the Connect NC investments without a tax increase.
Andrew T. Heath
State budget director
The length limit was waived.