RALEIGH, N.C. – State Treasurer Janet Cowell Friday released the 2009 Debt Affordability Study to Gov. Perdue and members of the General Assembly.

The annual analysis found that the state can authorize $50.2 million in new general fund-supported debt for each of the next five years and remain within the 4 percent debt service to tax revenues target ratio.

However, the combined debt capacity of the Highway Fund and the Highway Trust Fund has been exhausted through Fiscal Year 2011-2012 and recovers only modestly thereafter over the 10-year model horizon.

“The committee specifically recognizes that there is over $2 billion of debt already authorized that will provide a significant opportunity for economic stimulus when it is issued,” Cowell said. “In addition, increasing the amount of debt service in the budget over and above the 4 percent target could leave the state with less flexibility to address other potential budgetary challenges in the next few years.”

Treasurer Cowell and the Debt Affordability Advisory Committee continue to urge the Governor and the General Assembly to move away from issuing non-voted debt, so-called “special indebtedness”, and return to the use of general obligation debt, which requires a vote of the people and costs less.

North Carolina currently maintains a reasonable level of debt when compared with its peer group composed of the other states rated “triple A” by all three bond rating agencies. The calculation of the state’s general fund debt capacity is based on the recommendation that debt service should be targeted at no more than 4 percent of general fund tax revenues and should not exceed 4.75 percent.

Currently, all of the state’s debt ratios are at or below the median levels for the state’s peer group and are considered manageable at current levels. In the current economic climate, draw-downs of state reserves may be inevitable. However, Treasurer Cowell and the committee strongly recommend that fund balances be replenished as quickly as possible and that budgetary structural balance, a key factor in maintaining the state’s “triple A” bond rating.

The study was prepared by the staff of the State and Local Government Finance Division of the Department of State Treasurer, and approved by the Debt Affordability Advisory Committee, which was created by the General Assembly in 2004 and is chaired by Treasurer Cowell.  Debt Affordability Advisory Committee members include:  Cowell, Secretary of Revenue Kenneth Lay, State Budget Officer Charles Perusse, State Auditor Beth Wood, State Controller David McCoy and legislative appointees Christopher Henson and James Porto.

A full copy of the report is available at www.nctreasurer.com under the “State and Local Government” section.