State Runs Out Of Cash, Uses Special Line Of Credit
PITTSBURGH (KDKA) -- Some state officials call it a temporary cash flow problem.
Others say it's more serious.
"This is a bad moment," Pennsylvania State Treasurer Rob McCord, a Democrat, said on Tuesday.
Ten weeks after Gov. Tom Corbett signed a $29.1 billion budget, the state ran out of cash. That's like a checking account with nothing in it, and it left the state unable to pay its bills.
"We literally saw the General Fund drop below zero dollars. That's a big deal," added McCord.
As he has done before, McCord created a $1.5 billion line of credit using available cash in other accounts from which the administration immediately drew $700 million.
"The credit line is allowing people to get paid, schools to get their revenue, etc., and government is functioning and we have an elegant financial solution and financial instrument," said the Treasurer. "The bad news is that's a short-term solution to what we believe is a long term problem."
State Auditor General Eugene DePasquale, also a Democrat, said the early shortfall was worse than he had predicted when the budget passed in July.
"Our department put out a statement that by December we would regret the budget passed as is because it relied on too many one-time fixes," said DePasquale. "It turned out we were way too optimistic."
But Budget Secretary Charles Zogby said cash flow issues were common at the state.
"They've happened in good times and bad," he said. "We've helped a lot of school districts this fall, particularly the Philadelphia school district, with cash flow issues, so again, to suggest this is some historic occurrence that is happening is just hyperbole."
And Zogby suggested Democratic officials were hyping all this for the election.
"I find it very curious that it's occurring now in the middle of a political season," the Budget Secretary added.
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