State Treasurer Joe Torsella Friday announced the authorization of a $1.8 billion line of credit from Treasury’s Short Term Investment Pool (STIP) to the Commonwealth’s General Fund to be paid back on or before April 2. He explained this action in a statement--
“For the past several years, Treasury has made loans from its investment funds to the General Fund for short-term cash flow purposes. As we have said, to meet our legal standard of a “prudent” investment of taxpayer funds, a balanced budget plan should be in place to secure such loans, and we have repeatedly called for action to that end.
“On October 4th, Gov. Wolf announced that he would take responsibility for balancing the budget relying solely on his executive authority, and presented Treasury with details of his plan to do so. Recognizing that the executive has extensive tools to achieve balance, including the ability to put funds into budgetary reserve, Treasury approved a five business-day borrowing on October 12th on the basis of that plan. Since then, that borrowing has been repaid.
“As I said then, however, the appropriate resolution has always been for the General Assembly to adopt a revenue package to fund the enacted budget. So I was pleased to see the General Assembly, on a bipartisan basis, complete its work of passing a 2017/18 budget earlier this week.
“Under these circumstances, Treasury is able to renew its cash-flow lending to the General Fund. I have therefore approved, effective today, a line of credit to the General Fund not to exceed $1.8 billion and to be repaid in full on or before April 2, 2018. The administration has drawn an initial $100 million on this line today.
“In light of the unusual events surrounding this year’s budget, we have written new provisions in this line of credit to secure Treasury’s investment, and to provide alternatives if circumstances change.
“Building on the criteria we have articulated this year, in the weeks ahead Treasury will be comprehensively reviewing this lending program, and will establish and communicate appropriate guidelines and standards for future lending by Treasury to the General Fund. I look forward to the Governor taking responsible action with the bills now on his desk to fully complete this budget process."
