State Borrowing the Result of Overspending
Yesterday, the Pennsylvania State Treasurer and Auditor General approved a short term “STIP” loan to cover cash flow. For reference, you can see the GF balance on the Treasurer’s new portal. Both men then issued stern warnings about balancing the budget.
Does this mean we need to raise taxes?
The state has done short-term borrowing many times—relying on up-front loans to pay its bills, while waiting on tax revenue that comes in early in the year.
Let’s be clear: No tax increase will generate $750 million today, or even next week or month. Even borrowing money through a bond issue takes time to process.
Moreover, tax hikes won’t close the “structural deficit” caused by overspending. Last year, Gov. Wolf raised taxes by $650 million, but that didn’t prevent the need to borrow to make payments. Nor did it balance the budget.
The reason the state needs to borrow so early in the fiscal year is that last year ended with a deficit of more than $1.5 billion—meaning Gov. Wolf spent $1.5 billion more than the state collected in revenues—and now taxpayers owe that bill.
Not only did [Wolf] fail to reduce spending after it became clear the budget wasn’t balanced, he spent $400 million more than the legislature enacted.
As we’ve pointed numerous times, the governor has a legal obligation to reduce revenues to match spending to make the budget balance. Gov. Wolf abdicated that legal responsibility last year. Not only did he fail to reduce spending after it became clear the budget wasn’t balanced, he spent $400 million more than the legislature enacted.
While the state budget deficit grew, Gov. Wolf did nothing. Auditor General DePasquale said nothing about this growing deficit. (Treasurer Torsella only started in January, so he escapes blame for last year’s unbalanced budget).
It is the governor's duty to reduce spending to match revenues. It is legislature's responsibility to control spending growth to match economic growth. When these obligations go unmet, Pennsylvania families and job creators ultimately bear the consequences.