Pennsylvania’s general fund is on track to be $1.6 billion dollars underwater by the middle of next month.
In the past, the state Treasury has extended lines of credit to help the state keep paying immediate expenses when funds bottom out.
But Treasurer Joe Torsella says that may no longer be fiscally prudent.
The cash balance would have already hit zero this month, if not for a short term, $750 million credit line from the Treasury. The state has to pay that back with interest next week. But the fund is expected to run dry yet again before the end of August.
In some ways, this is familiar territory. Last year, the Treasury authorized a $2.5 billion line of credit in August — and similar credit lines have been commonplace in years past.
But Torsella said this year is different — it’s not fiscally responsible to keep loaning money while the state budget is $2.2 billion out of balance.
If that imbalance isn’t fixed, Torsella said he’s seriously considering not authorizing any more credit.“We try to talk about what the treasury’s short-term investment fund is and isn’t,” he said. “What it isn’t, is a rainy-day fund that’s just kind of the backup general fund.”
He added “I don’t know of a precedent where there’s been extended, long-term lending by Treasury into a situation where everyone acknowledges that the budget, at the beginning of the fiscal year, is $2.2 billion out of balance.”
If Torsella doesn’t authorize the credit, the state has a couple of options.
It could potentially get an outside loan to cover costs — uncommon practice for a state. But Auditor General Eugene DePasquale — who would have to sign off on it — said it’s unclear if any lender would agree.
“If you were a private-sector bank with a board of directors and investors, and you were watching this circus going on, it would be hard to think, ‘yeah, I’m confident giving them a loan,’” DePasquale said.
Another possibility would be for Governor Tom Wolf’s administration to start freezing spending.Wolf has resisted that option, and has said that since lawmakers voted to pass a $32 billion dollar state budget, they should commit to funding it.
Torsella is urging the state House to return to session and come up with a budget compromise. In a statement, a spokesman for the governor echoed that sentiment.
A spokesman for House Republicans called Torsella’s reluctance to extend additional credit “not ideal,” but acknowledged, it’s the treasurer’s decision.
The chamber remains on a six-hour call, but has announced no plans to return to session.