The Arizona Loan Commission has approved a plan that will allow the state to negotiate with banks for short-term loans for the first time since the Great Depression as the decline in revenue continues.
The commission consists of Gov. Jan Brewer, state Treasurer Dean Martin, and director of administration William Bell. It voted to allow the state to borrow between $104 million and $184 million each day for a week in April at an interest rate of no more than 2.25%.
Martin said the cash is needed because scheduled payments of $550 million in aid to local school districts in April would overdraw the state’s bank account. Without the borrowing, he said, Arizona could not make its payroll or issue tax refund checks.
“We literally have no other way to raise cash,” Martin said at last week’s commission meeting. “The state is literally living paycheck to paycheck at this point.”
Revenues have continued to fall at a faster rate than spending has slowed, Martin said.
He said the operating balance on March 18 was $145 million, or 1% of the general fund budget, before he transferred $100 million from the budget stabilization fund to the general fund to cover expenses.
The state would have run out of cash on March 13, Martin said, except for $218 million of one-time transfers that were part of the fiscal 2009 budget reduction plan adopted in January and an emergency distribution of $307 million of federal stimulus funds.
“Even with this injection of over half a billion in new money, there are not enough cash reserves to meet spending obligations in April,” the treasurer said.
Borrowing should be limited to a week, he said, as state income tax payments will begin coming in next month.
The Legislature in January approved spending cuts and fund transfers to close a $1.6 billion shortfall in Arizona’s fiscal 2009 budget.
However, legislative budget director Richard Stavneak said last week that another shortfall of $500 million could develop before the end of the fiscal year on June 30. He said tax collections in January and February were $155 million less than anticipated when the revised budget was adopted.
