COLUMN: Legislative Happenings - A look at state debt

We have been hearing a great deal about paying back our state debt. Even though the Federal Act states that the $700 million in federal stimulus funds can be used for only education, safety, and health care issues, the governor has refused the funds unless it is used to pay down state debt. He has been the harbinger of this message. Let’s talk about our state debt.

Of the nine highest-rated states, South Carolina has the lowest debt per capita ($494). Stated another way: Of the 50 states, only nine, including South Carolina, are “highly rated.” Of these, South Carolina has the lowest debt per capita. Debt per capita is a measure of the debt burden of a state’s citizenry.

South Carolina has one of the lowest debt burdens per resident of the highly rated states — the most sought-after category — and ranks better than 37 other states nationwide, regardless of credit rating.

According to Moody’s, a financial research and analysis company, of the 50 states, South Carolina has a debt per capita lower than 37 others. Of the 12 Southeastern states, South Carolina has the fourth-lowest debt per capita, and of the nine highest-rated states, South Carolina has the lowest debt per capita. How does South Carolina compare with our neighbors? South Carolina has 45 percent less debt per person than North Carolina and 48 percent less debt per person than Georgia.

The other debt ratio typically looked at by rating agencies is debt to personal income (PI). Of the 50 states, South Carolina’s PI ratio (1.7 percent) is lower than 35 other states’. Of the Southeastern states and the highly rated states, South Carolina has the lowest ratio. This is true even though our state has a lower personal income than other states.

How does our state compare to our neighbors in this category? South Carolina’s share of debt as a percent of PI is 39 percent less than North Carolina and 43 percent less than Georgia.

We have heard from credit firms about our present debt situation. Fitch, an international ratings agency, says South Carolina has a “careful and conservative approach to both financial operations and debt.” Moody’s says we are “conservative with debt and fiscal management.” Our “credit strengths are conservative fiscal policies, including debt limits ... state debt levels near or below medians,” and “State debt levels remain low, due in large part to constitutional statutory restrictions on GO (general obligation) borrowing.”

Standard and Poor’s states, “South Carolina’s AA+ rating reflects ... low debt, coupled with tightly controlled debt issuance guidelines,” and “Given the state’s historically conservative stance toward debt issuance, GO debt levels remain low ... ”

For South Carolina and its debt capacity, we are using about 56 percent of our constitutionally allowed debt capacity. This means the state “reserves” are about 44 percent of its allowed issues.

This is further evidence of South Carolina’s conservative and cautious approach to debt management as continually noted by the rating firms.

Based on current capacity estimates, South Carolina could issue roughly $740 million in the current year. This number will only increase in the near term, as 52 percent of our GO debt is slated to be wiped out in five years, while 91 percent will be paid off within the next 10 years.

— McGill can be reached at his home address, 601 Longstreet St., Kingstree, SC 29556, or at his legislative office, P.O. Box 142, Columbia, SC 29202. Call him at (843) 355-7217 in Kingstree or (803) 212-6132 in Columbia, or e-mail him at JYM@scsenate.org.