State will have to start borrowing money: Treasurer Dean MartinBy Howard Fischer
Capitol Media Services
PHOENIX -- Arizona is poised to do something next month it hasn't done since the Great Depression: borrow some cash to make sure its checks don't bounce.
State Treasurer Dean Martin said Wednesday the fixes already made to the state budget and the arrival of the first $307 million in federal stimulus dollars kept the bank account in the black even though tax collections are far below expectations. And Martin said that overall revenues this budget year will cover overall expenses.
The problem, he said, is cash flow.
Specifically, the state has to pay about $650 million in aid to schools on April 15. But there will be less than $400 million in the treasury that day.
Martin is taking the first necessary steps today by convening the State Loan Commission which also includes Gov. Jan Brewer and Bill Bell, head of the state Department of Administration. It has the legal duty of setting the maximum annual rate of interest the state is willing to pay for the cash.
He figures that cap will be in the neighborhood of 2.5 percent. But Martin said that, realistically, he believes the state can get the money at an APR of less than one percent.
Even that interest rate, for just a few days, still translates to a lot of cash: Martin figures the price tag for borrowing several hundred million dollars will be in the $500,000 range.
All this, however, should be invisible to the average Arizonan. In fact, he said, that short-term borrowing ensures people that the checks they get from the state, whether in payroll, to purchase supplies or tax refunds, are good.
While this is the first borrowing in several generations, Martin said it won't be the last.
He said it will take some time before the state's financial condition improves to the point where it is collecting enough each month to constantly have sufficient cash to meet the bills.
"Until revenues start exceeding spending and we start getting extra money in the bank account, we're going to basically be living paycheck to paycheck on state level,'' he said.