Connecticut could use bond anticipation notes or a line of credit if cash flow becomes a problem later this year, Gov. M. Jodi Rell said Monday.
“Our state keeps its money in a common cash pool, in part so that we can earn as much interest as possible,” Rell said in a press release. “The downside of that practice is that when the economy is slow we do not always have a large amount of ready cash.”
The governor said it wasn’t clear yet whether the state would need to do anything. “If we must act, we will be looking for the best option — one that will give us the liquidity we need without incurring excessive interest charges or other expenses,” she said.
Rell spokesman Rich Harris said the state would have to see how tax revenues come in over the coming months to determine what steps it might take. Rell’s statement followed notification by Treasurer Denise Nappier that a cash-flow problem was possible this year due to the slumping national economy.
If Connecticut did use Bans it would be to accelerate borrowing that the state usually does to reimburse its general fund for capital costs and not deficit financing, Treasury staff said.
The current-year $18.4 billion budget faces a $1.2 billion shortfall—$139 million more than estimated a month ago, Comptroller Nancy Wyman said Monday.
Income tax revenue is expected to fall $900 million short of budgeted estimates to $6.7 billion. Sales taxes are now expected to fall by $532 million and corporation taxes are already down by $183 million, according to a press release from the comptroller’s office.
“As the final quarter of the fiscal year approaches, the decline in these major tax categories is accelerating,” Wyman said in a press release. “Decisive action to reduce this historic shortfall must be taken quickly to avoid completely draining our $1.4 billion rainy-day fund.”
