Less than two months into a new budget year, the state seems to be engaged in a loop of borrowing and paying itself back.
On Aug. 16, the Pennsylvania Treasury provided a $750 million loan to the General Fund to pay its bills.
“It’s always a problem when you’re having to borrow money to pay your daily living expenses,” said Deputy Treasurer Jack Stollsteimer.
The state is scheduled to repay that loan Wednesday, as August revenues come into commonwealth coffers, but then ask for another loan at the end of the month from the Treasury’s Short Term Investment Pool.
“The necessity to step in and financially prop up the general fund just six weeks into the financial year is both extraordinary and without precedent in Pennsylvania,” Stollsteimer said.
According to the deputy treasurer, the state has taken loans from the Treasury for several years but not at this amount and this early into a new budget year.
He blames a structural deficit and the lack of agreement on a revenue package to pay for the agreed upon expenditures.
“They passed a spending plan that everyone in Harrisburg including the leaders of the legislature that was going to come up short," he said.
The Senate on July 27 approved a revenue package, but House leadership has yet to present a plan for a vote.
Stollsteimer said the state borrowing from the Treasury is similar to a consumers taking out a loan: you pay it back with interest.
“Yes, interest is paid back on the money that is borrowed from the short term investment fund, so that’s another cost of borrowing," he said.
He said Treasurer Joe Torsella has urged the governor and House leaders to agree on a revenue package soon because their projections show that the general fund will have a negative balance again in September and “will remain under water for two-thirds of the fiscal year [with] overall borrowing potentially as high as $3 billion.”