- The Washington Times - Thursday, March 19, 2009

PHOENIX (AP) - Arizona needs to resort to rare short-term borrowing to bridge an expected April cash shortfall as the recession continues to hammer state tax collections after a January midyear budget fix, Treasurer Dean Martin said Wednesday.

The state must borrow approximately $200 million on a daily basis over a week in April when cash will run short because of $550 million of payments to school districts, Martin said.

Martin scheduled a meeting Thursday of a state commission to set a maximum interest rate, a step that he said would enable him to negotiate short-term loans from banks and other potential lenders that could include special state funds.

Arizona has not had to resort to similar borrowing since the Great Depression, Martin said.

The borrowing, the equivalent of commercial notes issued by corporations, will enable the state to conduct business as normal, making payroll and issuing tax refunds on schedule, Martin added.

“We’re doing this so the public isn’t affected,” he said.

However, “the state is literally living paycheck to paycheck at this point,” Martin said. “The economy has gotten worse than we had projected.”

He said the state is in the black now only because of an emergency distribution of $307 million of federal stimulus money for health care and one-time transfers of $218 million from special-purpose funds. The one-time transfers were authorized under the January budget fix.

The Loan Commission meeting’s agenda released by Martin’s office calls for the panel to review the state’s cash flow and to consider setting a maximum interest rate for warrant notes that the treasurer could issue to temporarily cover state obligations.

The commission consists of the treasurer, the governor and the director of the Department of Administration.

Martin previously asked the commission to set a maximum interest rate, but then-Gov. Janet Napolitano and the administration director balked during a Jan. 8 meeting, with Napolitano saying it was premature and not necessary. Republican Jan Brewer has since replaced Napolitano, a Democrat, as governor.

Interest on the short-term borrowing probably will total well under $500,000, Martin said.

The Legislature closed a $1.6 billion shortfall in the then-$9.9 billion budget late in January by approving spending cuts, use of stimulus money and transfers of special-purpose funds.

However, a new developing shortfall in the current state budget became apparent in February, and legislative budget director Richard Stavneak said Tuesday that the new gap could reach $500 million by the time the fiscal year ends on June 30.

Stavneak cited January and February tax collections that were $155 million below levels anticipated when the $1.6 billion budget fix was approved.

The state also faces an estimated $3 billion shortfall in the next fiscal year based on $11 billion of spending, though Stavneak said that gap could be slightly lower based on the January spending cuts and updated revenue figures.



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