I had a moment of deja vu when Pennsylvania State Treasurer Rob McCord and Auditor General Jack Wagner blew the whistle on a planned $1 billion state bond issue. The officials have concerns about the state’s finances, and want incoming Governor Tom Corbett to consider the issue.
The most debilitating financial crisis Philadelphia faced in the modern history began in a eerily similar way. In 1990, then City Controller Jonathan Saidel objected to a routine borrowing the city does every summer to tide the treasury over until property tax revenues arrive in February.
Saidel was one of three members of a normally-invisible committee that approves city borrowing. So when he expressed public doubts about the city’ finances, Wall Street rating agencies took public notice, which encouraged other politicians to squawk, generating more press coverage and further worrying Wall Street, and, you get the idea.
Within months the city was on a downward spiral of credit downgrades, nasty media coverage and political infighting. It ended in 1991 with a state borrowing (which city taxpayers had to repay) and the creation of an independent financial oversight agency which exists to this day.
Saidel’s complaints weren’t made up. The city’s finances were seriously awry. But the state has some truly scary financial monsters to confront next year, and you have to wonder what’s ahead. Maybe these complaints about a bond issue that would otherwise escape public notice are the opening acts of a drama we all have a serious stake in.