October 9, 2018

#9 | Ranking the States by Fiscal Condition: North Carolina

Summary

On the basis of its solvency in five separate categories, North Carolina ranks 9th among the US states for fiscal health. North Carolina has between 1.67 and 2.72 times the cash needed to cover short-term obligations. Revenues exceed expenses by 12 percent, with an improving net position of $530 per capita. In the long run, North Carolina has a net asset ratio of 0.08. Long-term liabilities are lower than the national average, at 14 percent of total assets, or $938 per capita. Total unfunded pension liabilities that are guaranteed to be paid are $131.56 billion, or 31 percent of state personal income. OPEB are $32.47 billion, or 8 percent of state personal income.

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Key Terms

  • Cash solvency measures whether a state has enough cash to cover its short-term bills, which include accounts payable, vouchers, warrants, and short-term debt. (North Carolina ranks 23rd.)
  • Budget solvency measures whether a state can cover its fiscal year spending using current revenues. Did it run a shortfall during the year? (North Carolina ranks 2nd.)
  • Long-run solvency measures whether a state has a hedge against large long-term liabilities. Are enough assets available to cushion the state from potential shocks or long-term fiscal risks? (North Carolina ranks 8th.)
  • Service-level solvency measures how high taxes, revenues, and spending are when compared to state personal income. Do states have enough “fiscal slack”? If spending commitments demand more revenues, are states in a good position to increase taxes without harming the economy? Is spending high or low relative to the tax base? (North Carolina ranks 16th.)
  • Trust fund solvency measures how much debt a state has. How large are unfunded pension liabilities and OPEB liabilities compared to the state personal income? (North Carolina ranks 14th.)

For a complete explanation of the methodology used to calculate North Carolina's fiscal health rankings, download the full paper and the dataset at mercatus.org/statefiscalrankings.

To read all our work on North Carolina, go to mercatus.org/states/north-carolina.