Treasury loan props up Pa. operating fund
HARRISBURG – Pennsylvania Treasurer Robert McCord said Tuesday he authorized a $700 million loan to the state government’s main bank account after the balance dropped below zero for the first time in at least 14 years.
The transfer, made Monday, borrows from other state funds at a low interest rate of 0.25 percent, and McCord predicted the state would need to borrow more soon to pay the bills.
The announcement, coming 2½ months after Gov. Tom Corbett signed a Republican-penned budget package, was immediately swept up into campaign-season politics.
Democrats sought to paint the loan as an indictment of the Republican governor’s handling of the state’s fiscal affairs. Republicans accused Democrats of trying to twist a routine method of covering a short-term cash shortage into a political weapon against Corbett, who is seeking re-election.
The Corbett campaign and Democratic challenger Tom Wolf’s campaign each released a statement accusing the other of reckless fiscal behavior – Corbett as governor, Wolf as revenue secretary under former Gov. Ed Rendell.
At a Capitol news conference, McCord and Auditor General Eugene DePasquale, both Democrats, tied the need for the loan to a persistent structural deficit in the state’s government finances, and said it is an alarming sign of the state’s deteriorating financial condition.
“There’s going to be a day of reckoning very soon,” DePasquale said.
Pennsylvania received its third bond downgrade in two years in July, after Corbett signed a $29 billion no-new-taxes budget that was balanced with the help of about $2.5 billion in stopgaps. The budget package authorizes $943 million in additional spending and cuts business taxes.
Corbett’s aides and other Republicans noted that the budget is balanced and that such financing has been used numerous times before, under many other governors. House Majority Leader Mike Turzai, R-Allegheny, called the news conference by McCord and DePasquale “political theater and an unnecessary waste of time.”
Corbett’s budget secretary, Charles Zogby, said there is no cause for alarm. He said politics is behind the hand-wringing by McCord and DePasquale.
“To suggest that some historical event is happening here is just hyperbole,” Zogby said.
Zogby said the loan is necessary during what is typically a low-cash flow period for the state. But McCord and DePasquale said it is unusual for a loan to be necessary so early in the fiscal year, which began July 1.
Aides to McCord said they checked back to 2000 and found no other instances of the state’s main bank account dipping below zero.