Brittney Lofthouse – Staff Writer
North Carolina is one of 16 states well-prepared for a financial recession according to an economic study released this month by researchers at Moody’s Analytics.
North Carolina has a record $1.5 billion savings reserve and has significantly improved its tax structure.
“The people of North Carolina can have confidence that our state is well-prepared for emergencies thanks to a better budget process and smart savings by legislative leaders in Raleigh,” said House Speaker Tim Moore. “I’m proud the North Carolina House has served families and businesses responsibly with careful planning of our state’s financial security. “
Moody’s Analytics provides financial insights on capital markets and credit risk management for investors, strategic planners and policymakers, and “pioneered the concept of stress-testing the public sector.”
Its study applies potential economic recession scenarios, ranging from moderate to severe, to each state’s fiscal readiness for an inevitable downturn.
The analysis considers the ratio of each state’s savings reserves to its spending commitments and measures the predicted impact of a recession on tax revenues. State budget flexibility and planning are also factored into the comparisons.
It groups states into three categories of preparedness: 16 states that “have the funds they need,” 19 states that “have most of the funds they need,” and 15 states that “have significantly less funds than they need.”
North Carolina ranked in the top-third of the Moody’s Analytics study as one of 16 states that “have the funds they need.”
In April of 2017, Moody’s Investor Service also praised North Carolina’s House Bill 7 Savings Reserve Requirement as a “credit positive” commitment.
“I was happy to be one of the co-sponsors of House Bill 7 that was recently praised by Moody’s Investor Service as being one of the factors in N.C. getting top ratings from Moody’s Analytics. They ranked states as to their readiness for an inevitable economic downturn,” Rep. Kevin Corbin said. “House bill 7 establishes a spending reserve and set criteria for those funds being used. It is not a lot different from what Macon County has done in the past few years. By having adequate reserve funds, or ‘savings account’ for the state, we set aside money establishing a ‘rainy day fund’ or savings account for the State of N.C. Moody’s ranked each state considering savings reserves compared to spending commitments.”
In years past, according to Moody’s, “North Carolina’s reserves have been below average.”
The October “stress test” study by Moody’s Analytics also notes “policymakers should be diligently implementing statutory reserve guidelines,” as North Carolina did with House Bill 7.
“It makes sense for individuals and families to have a savings account,” said Corbin. “It just makes sense that counties as well as states do the same. That way in tough times or when emergencies happen, you have the funds without having to go back to the taxpayers. I was one of 10 legislators to co-sponsor House Bill 7. The measure passed both the House and Senate with overwhelming bi-partisan support.”