Warns of $860 million in expenditures at risk for missed or delayed payment, urges immediate legislative action
Harrisburg, PA – Pennsylvania Treasurer Joe Torsella today released a statement regarding Treasury’s Short Term Investment Pool (STIP), and warned that on Friday, September 15, the General Fund’s balance is projected to fall to zero. As a result, without corrective action, $860 million in scheduled expenditures would be delayed until the General Fund has received sufficient revenue.
In a joint letter to the Governor and members of the General Assembly, Treasurer Torsella and Auditor General DePasquale outlined the inability of the Commonwealth’s General Fund’s balance to meet expenditure demands. The letter also noted that since 2012, Standard & Poor’s has either downgraded Pennsylvania’s credit rating or placed it on a negative credit watch five separate times.
“Today, Auditor General Eugene DePasquale and I once again sent a joint letter to all Pennsylvania legislators and to the Governor, detailing a cash crisis we have been forecasting for many months. As the two public officials who must jointly authorize any private short-term borrowing by the Commonwealth, we communicated that having seen no progress in addressing the Commonwealth’s structural imbalance, under the present circumstances we are disinclined to support such borrowing.
Further, under the present circumstances, I am disinclined to authorize a loan from Treasury’s Short-Term Investment Pool for September 15. It is the constitutional responsibility of the legislature and the Governor to enact a balanced budget by July 1. My obligation as Treasurer is to make only prudent investments of the funds under our care, not to enable continued budgetary dysfunction and a chronically unbalanced budget by providing emergency overdraft protection to the General Fund. No Pennsylvania business or household running a severe deficit could expect to borrow money without having a plan in place to balance its budget, and few lenders would consider such a loan to be prudent.
Moreover, while it is reasonable for Treasury to help address cash flow dips and spikes in a responsible budget, continual lending of the taxpayers’ money without an underlying balanced budget in place permits policymakers to continue to avoid resolving Pennsylvania’s long-term fiscal challenges.
This disruption was – and remains – entirely avoidable. The can has been kicked down the road for far too long, and now we have run out of road. I urge the General Assembly to finish this work, and enact a responsible revenue package in the next 72 hours.
Time is short, but not yet out. We expect to have a further announcement later this week.”
Pennsylvania Treasurer, Joe Torsella
Treasurer Torsella authorized a short-term two-week $750 million line of credit from Treasury’s Short Term Investment Pool (STIP) to the Commonwealth’s General Fund from August 14 to August 23. The STIP loan was released in full to the General Fund on August 15, and was paid back on August 23 at an interest rate of 85 basis points.
Treasury’s line of credit from its Short Term Investment Pool began as a cost-effective alternative to public market Tax Anticipation Notes. The Commonwealth’s cash shortfalls have grown in duration and amount over the past three years, and as a result, the use of the Treasury’s line of credit has evolved well beyond its original intent.