Pennsylvania Treasurer Joe Torsella has decided to authorize a five-day, $700 million loan to keep the state from missing Medicaid payments while its general fund runs low.
The move is politically fraught.
For two months, Torsella, a Democrat, refused to lend money until the legislature passed a plan that would balance the state’s finances.
Now, Gov. Tom Wolf is taking unilateral steps to try to bring the three-months-late budget in line. But critics of Torsella and Wolf say not enough has actually changed to justify the shift in position.
The new loan — which comes from the Treasury’s short-term investment pool — is designed to tide the general fund over until the state gets a federal reimbursement in a few days.
It comes after Wolf spent much of the week insisting his plan to balance the budget is valid, but Torsella stayed noncommittal.
On Thursday, the treasurer announced the administration had provided enough preliminary details about the plan to justify a very short-term loan.
“While the announced plan should be no one’s first choice for long-term fiscal policy, neither should be continued financial uncertainty nearly three months into the fiscal year,” Torsella said.
Beyond verbal statements from Wolf, no official version of the plan has been made public.
Broadly, it involves borrowing against the state liquor industry and Pennsylvania Farm Show complex, plus stopping hundreds of millions of dollars in customary payments to state-related universities.
“Service providers for health care and treatment programs, school districts and job-training programs shouldn’t suffer because a few politicians in the General Assembly refuse to pay for the appropriations that they passed more than 100 days ago,” said JJ Abbott, a spokesman for Wolf.
Republicans, including House GOP spokesman Steve Miskin, maintain the situation is still no better than when the legislature was negotiating the budget.
“Has the Farm Show commission approved his plan? Has the LCB voted for and approved his plan? No,” Miskin said. “It’s nothing more than, ‘here’s an idea.'”
House Republicans had pushed for the treasurer to authorize a loan in August, when the general fund first began running low. Miskin said the primary concern of his caucus is that the lending policy seems like a double standard.
Senate Republicans, on the other hand, previously backed the treasury’s decision not to lend without a finished budget.
Spokeswoman Jenn Kocher said she’s concerned this is a change in position.
“We’ve long said that borrowing was only acceptable in the context of there being ongoing stability in budgeting,” she said. “Borrowing from one to the next to the next is not providing that stability.”
Democrats tend to support the loan. House spokesman Bill Patton said Torsella and Wolf are “acting responsibly.”
A Treasury spokesman said the $700 million loan will cost $115,694 in interest.
That’s all slated to be paid back Oct. 20. But soon after, state finances will be in even worse shape.
Torsella projects the general fund will run out of money again Oct. 27 and stay that way for about five months. He said expenses will exceed revenues by roughly $1.7 billion — and a good portion of that will be money due to public schools.
Torsella won’t confirm whether he’ll authorize a larger loan to cover that.
His office has said it’s still waiting for more specific information about the administration’s budget plan.