Harrisburg – In a letter to lawmakers dated Wednesday, Auditor General Eugene DePasquale and Treasurer Joe Torsella warned members of the General Assembly that the “commonwealth’s fiscal challenges” might put an end to the oft-used tool of borrowing from the Treasury’s long-term investment fund, known as STIP, to ensure the General Fund does not fall into a negative balance.
For the current fiscal year, the Treasury extended the General Fund a $2.5 billion credit line at a 0.75 percent interest rate that was utilized several times throughout the fiscal year to fund General Fund obligations when revenues did not come in at the pace needed to meet expenditures.
In Wednesday’s letter, the two row officers responsible for financial management and oversight of commonwealth dollars said their projections shows that absent significant reform, borrowing might exceed the capacity of traditional Treasury means.
"[W]e are concerned that next fiscal year’s borrowing needs may exceed the fund’s lending capacity and compel the Commonwealth to seek more costly public market alternatives as early as July or August 2017," they wrote.
"To be clear, absent appropriate and significant fiscal changes, Pennsylvania will be paying the bills on borrowed money for most of the 2017-18 fiscal year. The continued drop in the average annual General Fund balance is indicative of a structural imbalance between revenues and expenditures. Without a correction of this imbalance, we anticipate the trend of lower General Fund average balances to continue to worsen in the coming years."
Meanwhile, lawmakers are busy this month finding ways to craft the FY 2017-2018 budget with an anticipated deficit of around $3 billion and close the balance on the current fiscal year’s spending plan, which has a deficit of nearly $1 billion.
Speaking to the issue, House Republican caucus spokesperson Steve Miskin said while lawmakers appreciate the Auditor General and Treasurer looking into the budget and making their projects while not knowing what the final budget will look like, the budget crafted by House Republicans that passed the House back in April is dealing with the deficit.
“It’s very simple: You don’t spend as much,” he said of how to get at the deficit and away from the need for borrowing.
In the Senate, the Republican majority took the warning as a message to ensure the commonwealth does not go to taxpayers first to reduce any deficit.
"First, we need to remember that the governor’s office is responsible for cash flow. And to translate all of their fiscal-speak, basically they are telling us that we should turn to the taxpayers for more money," said Senate Republican caucus spokesperson Jenn Kocher. "As we continue with budget negotiations, we remain committed to our responsibility to examine all other avenues and make turning to taxpayers our last resort, not the first."