Pa. treasurer extends $750M line of credit to pay state bills
Joe Torsella said the GOP-controlled legislature's failure to balance the budget means there will be nothing in the general fund by the end of the month.
Pennsylvania Treasurer Joe Torsella and Auditor General Eugene DePasquale, fresh off signing a short-term line of credit Thursday to help the state pay its bills, urged legislators to quickly balance the budget or risk placing the commonwealth in a precarious financial position.
The $750 million line of credit, signed by Torsella and DePasquale, both Democrats, covers the 10-day stretch from Aug. 14 to 23. Without it, Torsella said, the state's primary bank account, known as the general fund, would dip into negative numbers.
While some transfers are normal, Torsella said, the timing of this one — six weeks into the fiscal year — is "extraordinary and without precedent."
"Cash-flow borrowing this early and of this magnitude has not happened in the last 25 years," Torsella said in a statement. "As a state, we once again find ourselves in uncharted waters, not only having to borrow so early in the fiscal year, but doing so with an underlying general fund budget that is not yet balanced."
He said he was worried that unless legislators take swift action to balance the budget, it could become more difficult for the treasury to make similar loans in the future. The state, which has already received a warning from Standard & Poor's, could face a credit downgrade, he added.
On June 30, the legislature passed a nearly $32 billion spending plan, but no way to pay for it. Since then, negotiators have been tasked with plugging a $1.5 billion shortfall in the last fiscal year and a $700 million deficit in the one that began July 1.
Gov. Wolf allowed the spending plan to lapse into law without his signature.
The Democratic governor, during an interview Thursday in the Capitol Rotunda with radio station WITF-FM, said he "wanted to try to get both of these things done, and I thought by just letting it become law rather than signing it, we could wait the 10 days and hope that within that 10-day period the revenue package would be passed by the Senate and the House."
But that didn't happen. Last week, nearly a month past the June 30 deadline, the Senate approved a series of bills that would balance the budget in part by taxing drilling for natural gas, and by raising or imposing new taxes on telephone, electric, and gas bills. Exactly whom to tax and how much have been sticking points in budget negotiations — with Wolf and some key leaders in the Republican-controlled often ending up on different sides of those talks.
Senate Republican leaders, who also have a majority in their chamber, said they voted on the budget bills last week because they were concerned about the state's finances.
"The commonwealth's revenue situation is dire and the Senate worked efficiently to address it," President Pro Tempore Joe Scarnati (R., Jefferson) said in a statement. "Difficult decisions were made, and we certainly did not come to the components of the revenue package lightly."
The budget bills passed by the Senate still require approval by the House, which has not set plans for a return, though it did tell members to prepare to come back by the end of the month.
DePasquale echoed many of Torsella's concerns about the timing of the loan and the potential for a credit downgrade.
"My concern goes beyond the cash-flow problem that indicates the state's unaddressed structural deficit," he said in a statement. "I am concerned that schools and county agencies across the state are once again worried about funding uncertainties."
He urged the House to return next week.
"And once they are back," he said, "the House and Senate leadership and the governor should immediately lock themselves in a room and work until they figure out a way to provide Pennsylvanians with a balanced budget."
Wolf, during his radio interview, said: "Most of the actors here have bought into the bill that came out of the Senate. It's a matter for the House, basically Republican leadership, to sign onto that. We just need to get this done, and I think everybody who's working here wants to do that."
Steve Miskin, spokesman for the House Republicans, who control the House calendar, said that while plans for a return have not been set, some House leaders have been discussing the Senate bills.
"Honestly," Miskin said, "the biggest point is, if we do have a credit downgrade, it is because of the governor's $1.5 billion deficit spending spree from last year, and that is a huge hole that, unfortunately, Pennsylvania taxpayers are going to have to fill."