RALEIGH – North Carolina Department of Commerce officials say the state is ahead of schedule in paying off its debt to the federal government.
“It’s been a good year in terms of paying off the debt,” says Division of Employment Security assistant secretary Dale Folwell. “We’re almost $100 million ahead of expectation.”
That’s important, he says, because “as long as this debt’s outstanding, employers in North Carolina–or future employers who are thinking about coming here–have to pay a higher federal unemployment tax.”
Following the recessions of 2001 and 2008, North Carolina borrowed heavily from the federal government to pay state unemployment benefits. By January of this year, the resulting debt had reached $2.5 billion—third highest in the nation behind only New York and California.
Governor Pat McCrory made paying off the debt a priority, and researchers estimated that the debt would be reduced to about $2 billion by the end of the year—but Folwell says it’s now even less than that, about $1.87 billion.
The focus on debt reduction came at the expense of other programs, but Folwell says the debt puts North Carolina at a competitive disadvantage when it comes to attracting new businesses or retaining existing ones, so paying it off is important—and it’s equally important to prevent it from happening again.
“Paying off the debt–we can’t stop there,” he says. “We have to build a surplus, so that no one ever gets in this situation again.”
If the latest projections hold, the state will pay off the debt in full by November of 2015.