Treasurer says more short-term loans needed to keep state in black
PHOENIX – Arizona’s general fund on Wednesday borrowed nearly $340 million from a state investment pool to stay in the black while paying tax refunds and state aid to public schools amid an overall budget crisis.
Treasurer Dean Martin said the short-term borrowing is the first by the state since the Great Depression.
“If we didn’t do this, literally the state shuts down,” Martin said. “It’s lights out.”
Before and after a Loan Commission meeting, Martin displayed a treasurer’s warrant – a one-day IOU – that he earlier signed to borrow $339,904,046.80 from a state investment pool for special-purpose funds at an annual interest rate of 0.5 percent. The pool normally purchases U.S. Treasury notes, Martin said.
Martin said about a week of one-day warrants will be needed – probably in decreasing amounts – until sales-tax receipts arrive before the end of the month.
The general fund is short of cash largely because the recession has hit tax collections generated by housing sales and consumer spending. Lawmakers in January closed a projected $1.6 billion shortfall in the then-$9.9 billion budget by approving spending cuts, transfers from special-purpose funds and use of federal stimulus money.
Effects on state agencies and services include plans to raise fees for university students, layoffs of more than 1,000 state workers, elimination of some social-net programs and temporary closings of state parks.
The general-fund budget totals approximately $9 billion, but it faces a new, growing shortfall that legislative budget analysts project could reach $500 million by the June 30 end of the fiscal year. Lawmakers plan to use more stimulus money to cover that gap.
The Loan Commission on Wednesday approved a resolution setting the stage for more borrowing in the fiscal year that starts July 1. That borrowing could involve sources outside state government. Martin said it would have been too costly for the limited borrowing now needed to pay the necessary startup costs for outside borrowing.
The start of the current run of daily borrowing came as the state had to make $534 million in payments to public schools. The state would normally have to make a similar payment in May but lawmakers and former Gov. Janet Napolitano previously approved a postponement of that payment into the next fiscal year as a budget-balancing maneuver.
Still, Martin, said, “It’s going to get real close in May.”
Martin said his office had no records of the Great Depression borrowing but said state archivists found news clippings in which a previous treasurer discussed 1930s borrowing.