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11Oct

Capitolwire: A bit of a false start by Wolf regarding potential Treasury loan to PA’s General Fund this month

By Chris Comisac, Bureau Chief, Capitolwire

Published: October 10, 2017

HARRISBURG (Oct. 10) – It looks as though Gov. Tom “I’m going to manage the state’s finances myself” Wolf got a bit over his skis on Tuesday when talking about the state’s ability to pay its bills this month.

At an afternoon event in Harrisburg, Wolf said the state Treasury will provide a short-term loan to the Commonwealth’s General Fund, to be used to help the state cover its October bills.

One big problem – he didn’t run that announcement by Treasury, which has yet to indicate what it might do regarding the loans it has, in the past, provided to the General Fund. Last month Treasurer Joe Torsella decided against providing such a loan (after supplying one in August), arguing the imprudence of such loans when the current state budget is not balanced.

Here’s what Treasury spokesman Mike Connolly had to say following Wolf’s “annonce prématurée,” as the French would call it: “At this time, Treasury’s position in regards to a STIP loan remains unchanged. As the Treasurer has said repeatedly, it would be imprudent to provide a STIP loan without a plan for a balanced budget. Treasury has been in daily contact with both the Governor’s team and the Legislature and looks forward to seeing details on a plan that brings the budget into balance.”

Given that, the administration followed-up with a clarification of what Wolf actually meant to say.

“We continue to work with Treasury and we are confident that following the governor’s actions to balance the budget, pending payments to school districts, Medicaid providers and others who rely on state payments will be made on time,” wrote Wolf spokesman J.J. Abbott in a statement. “The governor was expressing his confidence that his plan to manage the deficit will bring the budget into balance.”

“Our Administration has been in constant contact with the Office of the Treasurer, and will continue to work with Treasury to provide detail on the governor’s plan,” Abbott continued. “As the governor said today, this is a stark contrast to last month when there was incredible uncertainty that the budget would be balanced as House Republicans continually dithered on passing a balancing plan.”

But is it really?

Last month Treasury stopped the loans because the budget was not balanced, and there were no near-term prospects of a balanced budget.

Without that funding, Wolf decided to delay paying some of the Commonwealth’s September bills for a few days, which was quickly followed by Standard and Poor’s announcing its decision to downgrade the state’s credit rating for a variety of budgetary reasons, but with a particular focus on the General Fund’s increasing liquidity issues and the nonpayment, or late payment, of the state’s bills.

Currently, the budget is still unbalanced, since the $1.5 billion budget deficit that accrued and went unaddressed last year remains unresolved, along with a way to supply the revenue to pay for all of this year’s planned spending.

Last week and this week, Wolf proposed two controversial plans to borrow money to pay off that one-time debt: $1.25 billion against the Pennsylvania Liquor Control Board’s revenues, and $200 million derived from a “lease/leaseback” deal involving the Pennsylvania Farm Show Complex.

Neither is certain – as there are plenty of questions about the governor’s authority to unilaterally pursue these transactions – and both appear as though they’ll take an extended amount of time, if they can be done, to complete.

The current situation doesn’t sound any different than the situation that existed in September, at least that’s how the House Republicans – who Wolf targeted with his ire last week after yet another failure by all concerned to find a budgetary agreement – see it.

“If this is the barometer that the Treasurer is using, it begs the question, ‘Why didn’t the Governor do this two months ago? Why did he allow bills not to be paid? Why did the Treasurer allow a credit downgrade?’” said House GOP spokesman Steve Miskin. “What changed? What’s the difference?”

“No one has seen the Governor’s actual plans yet,” continued Miskin. “All we heard was his little hissy fit last week stating this is what he’s going to do, while scapegoating the House Republicans for trying to get done a deal he agreed to get done.”

The Senate’s majority-holding Republican Caucus was more measured with its reaction to the day’s statements and restatements, although concern was expressed regarding Wolf’s borrowing plans.

“We are happy the Treasurer’s position remains unchanged,” wrote Senate GOP spokeswoman Jenn Kocher in a text. “We should not paper over our fiscal issues, and cannot borrow our way into balance.”

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