Treasurer: ‘Line of credit’ not money for shortfall
State Treasurer Kate Marshall said Tuesday the option of providing lawmakers and the governor a $160 million line of credit from local government funds managed by her office doesn’t cover part of this year’s shortfall.
She said it is simply a tool to keep enough money in the state’s checkbook to get to the 2009 Legislature in February.
“I can’t create money for them. They’d have to find the money to repay it,” she said.
Marshall proposed the idea, which several local government officials have praised, as a solution to the state’s potential cash flow problems between now and the end of the fiscal year.
The state is still facing a $330 million shortfall for this fiscal year and a special legislative session is tentatively set to begin Dec. 8 to handle that issue.
“This has nothing to do with that,” she said.
Marshall said it’s like a family that has bills and money coming in to cover them, but not enough money in the checkbook to pay them right now. Likewise, she said, the state can fix its financial problems once the legislature is in session, but may run short in the checkbook between now and then.
She said the line of credit would be used if the state’s checkbook starts to run short before then.
Chief Deputy Treasurer Mark Weinbarger said the line of credit would be needed if the General Fund dipped below $200 million. He said when large payments ” such as to the school districts ” are made or when large tax payments are made, the general fund can swing up and down by more than $100 million in a single day.
He said he and Director of Administration Andrew Clinger believe they might be able to avoid that and not have to touch the line of credit, but that it would provide a valuable backstop to make sure the state can pay its bills on time.
The money would come from the Local Government Investment Pool, which is money invested with the state by counties and cities. They do so because, in a pool which now has more than $750 million in it, the state can get those local governments a better rate of return than they can get individually.
Marshall said the plan is good for local governments since her proposal would pay the money back at an interest rate of a quarter percent more than they are currently making. And the state, she said, would be obligated to repay the money.
“The counties cannot be cheated,” she said.
In return, the state gets money to cover its needs in the short term at about half the 5.5 percent it would have to pay for a bond or other commercial cash infusion.
The plan, however, still hasn’t been approved by the attorney general’s office.
Critics say it’s a way around the constitutional prohibition on deficit financing.
Marshall says it’s not running in the red if the governor and Legislature sign legislation mandating repayment of any cash drawn down by the state.
Josh Hicks, chief of staff to Gov. Jim Gibbons, said they have asked the attorney general to rule on the plan as soon as possible. Legislative fiscal experts have asked the same of Legislative Counsel Brenda Erdoes.
– Contact reporter Geoff Dornan at email@example.com or 687-8750.