In a news interview yesterday, State Treasurer Joe Torsella threatened that he won’t allow the state to borrow any more money to pay bills, unless the budget is balanced. He further threatened that if the state doesn’t borrow money, he won’t write any checks for anyone—salaries, payments for services, grants, etc.
“I don’t know of any historical precedent for Treasury lending money to the Commonwealth when there is no balanced budget,” he said.
So what about state employees, including state lawmakers? Will they get a paycheck after Sept. 15th?
No, says the treasurer.
If there is no money in the bank account, he can’t process checks to pay anybody, including himself, along with legislators.
There are two clear problems with this game of chicken. First, even if the House passed the Senate package to raise taxes by $600 million and borrow (yes borrow) $1.3 billion to pay last year’s deficit, the Commonwealth would still need to borrow money from the Treasury on September 15.
Second, while Torsella can’t think of a time when the Treasury lent money with an unbalanced budget, I can. It was all the way back in … wait for it … 2016!
Last year’s state budget was never balanced, and faced a revenue shortfall early last fiscal year. The state ended the fiscal year with a $1.5 to $1.6 billion deficit—after Gov. Wolf spent $400 million more than the legislature appropriated.
The reality is this: Our constitution requires a balanced budget, and state law requires that the governor reduce spending to ensure the budget remains balanced. Likewise, it is the Treasurer’s responsibility to help enforce these laws.
The state’s current fiscal situation is the result of last year’s unbalanced budget, and inaction by the legislature, Gov. Wolf, and the state Treasurer to ever fix that problem.