Pennsylvania's two chief fiscal watchdogs warned legislators on Wednesday that the state might have to borrow as much as $3 billion to run the government in 2017-18 if structural budget problems are not addressed.
"What we saw is not encouraging," state Treasurer Joe Torsella said of the estimates he and Auditor General Eugene DePasquale made for the coming year. "It is a trend of, essentially, living on our credit card."
Torsella said there is a "deteriorating" general-fund balance exacerbated by continued spending and revenue results far below what legislators planned for in the 2016-17 budget. The two officials said Pennsylvania could face eight straight months in the coming fiscal year with the general fund in negative territory.
"This raises troubling questions about the direction of our finances," Torsella said during a conference call with reporters.
DePasquale said the logical conclusion by "any rational person" is that the current budget "was not really balanced." He said the first step legislators need to take is to pass "a real balanced budget."
A budget is supposed to be approved by the Legislature and the governor by July 1, the beginning of the new fiscal year. A budget passed by the House is sitting in the Senate awaiting action.
"The timing is not an accident," DePasquale said of the letter he and Torsella wrote to legislators. With budget talks gaining steam, he said it was incumbent on the two to issue warnings now.
"If this is not addressed in a serious way real program cuts are going to have to happen," DePasquale said.
In their letter, Torsella and DePasquale said the state's borrowing needs could exceed the ability of the Treasury to obtain a line-of-credit from the long-term investment fund, forcing Pennsylvania to go to the public market, which would have higher costs.
That could happen as soon as July or August, they said.
Torsella said most think a mix of spending cuts and tax increases are needed to address the structural deficit problems.
"The question is, how real that mix is," he said.
DePasquale said a $3 billion cut in spending is not realistic and that revenues would need to increase through taxes, and he pointed at Marcellus shale drilling as a starting point along with legislators addressing the issue.
"My recommendation is that the budget should be balanced and not fake balanced," he said.
(c)2017 the Beaver County Times (Beaver, Pa.)