State prepares to borrow cash; lawmakers skeptical

"MN Budget"

07/13/2010

The state is running out of options to erase a projected cash flow shortfall, and may have to resort to short-term borrowing to help fill the gap.

Though the 2010 legislative session concluded with a balanced budget, Minnesota Management and Budget Commissioner Tom Hanson said the state’s day-to-day cash reserves are still precariously low. He said “administrative actions” are needed to keep the state’s General Fund from dipping below acceptable levels as soon as December.

Hanson and other budget officials testified before members of the Legislative Advisory Commission. No action was taken. (Watch)

Beginning in August, the state plans to defer some $503 million in payments to school districts, higher education institutions and some human services programs, as well as delay some corporate and sales tax refunds. Even so, Hanson said it may not be enough.

“I am going to try everything I can to make sure that the state doesn’t have to short-term borrow,” Hanson said. Nevertheless, he is seeking the commission’s approval to establish a $600 million line of credit with U.S. Bank to help bolster the state’s cash accounts, if necessary.

Several lawmakers expressed concern that borrowing might hamstring the next governor with short-term debt, and that payment delays would harm public colleges and universities. Rep. Lyndon Carlson, Sr. (DFL-Crystal) said the administration should provide a more detailed plan before the commission votes on whether to recommend securing the line of credit.

One legislator, Senate Majority Leader Larry Pogemiller (DFL-Mpls), said he would not vote to approve borrowing under any circumstances.

“No matter how much information you give, I’m not for short-term borrowing,” Pogemiller said.

State law requires MMB officials to seek a recommendation from the commission before borrowing money; however, Hanson acknowledged that MMB may borrow money with or without the commission’s recommendation.