With March tax collections down and Pennsylvania’s fiscal future darkening because of the COVID-19 economic downturn, state Treasurer Joe Torsella’s office has extended the commonwealth a $2 billion credit line to meet “critical expenditure needs.”
“As our Commonwealth makes extraordinary but critically important sacrifices for the sake of public health, Pennsylvania Treasury will continue to focus on the ways we can help, and the things we can control, in these challenging and uncertain times,” Torsella said in a statement his office released Thursday. “That’s why I’m providing an update today on the steps Treasury has already taken, and our expectations for the months ahead, to ensure adequate liquidity in Commonwealth funds.
Originally authorized to run through April 12, the credit line will expire June 12, with the interest rate capped at 2 percent, Torsella said in his statement. That will “[reduce] the General Fund’s exposure to rate volatility and stabilizing debt service costs.”
The state is “anticipating a significant cash shortfall in the General Fund prior to the inflow of federal stimulus money, as a result of necessary coronavirus mitigation efforts. We are taking prudent steps to ensure adequate liquidity in our investment funds to be in a position to provide additional support to the General Fund over the next several months if needed.”
State tax revenues were down 6.2 percent in March, the state Department of Revenue said Wednesday, warning that the agency was bracing for a rough spring.
Income and sales taxes, which make up the biggest chunk of tax revenue, came in, respectively, $20 million and $24.2 million below estimates, reflecting businesses closures and worker layoffs, the Revenue Department said Wednesday.
The state has already delayed its income tax deadline until July 15 to match the federal Internal Revenue Service. That would delay up to $2.1 billion in state revenues, the agency said.
“We expect the pandemic will have a greater impact on revenues in the coming months,” Revenue Secretary Dan Hassell said in a statement Wednesday.
The $2 trillion federal stimulus bill that President Donald Trump signed into law last week earmarks $5 billion for state and local governments to help them recover from the COVID-19 pandemic. Among other things, the state will receive $14.1 million in grant money, matched by $2.8 million in state money, for voter education on new mail-in ballots, PennLive reported.
During a briefing earlier this week, Gov. Tom Wolf said he’s not ready to crack the hood on the $36 billion budget plan he submitted to lawmakers in February. But legislators who have oversight of the state’s purse-strings are preparing for the worst.
“No one should be predicting a rosy future in terms of the state’s finances,” said Sen. Vincent Hughes, of Philadelphia, the ranking Democrat on the Senate Appropriations Committee, told the investigative news outlet Spotlight PA.
And when state officials get a clearer picture of the state’s financial picture in April, “it’s going to be pretty stark,” Hughes said.
House Appropriations Committee Chairman Stan Saylor, R-York, offered a similar sentiment. Reached by the Capital-Star for comment in the wake of Wednesday’s release of tax collection data, he said the numbers are “going to create problems” for the state.