Gov. Malloy Authorizes Lines of Credit Up to $550M; Will Be Tapped if Needed

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Faced with \”reduced levels of cash,\” state Treasurer Denise Nappier received approval from Gov. Dannel P. Malloy to seek lines of credit for as much as $550 million, if needed, to fund daily operations.

\”Given the fiscal challenges facing the state, I believe it is prudent to prepare for the potential — though still not yet certain — need to borrow funds externally in order to fund cash flow requirements for current operations,\’\’ Nappier wrote to Malloy on Monday.

Nappier\’s request doesn\’t mean the state will automatically obtain the emergency loan; it simply sets into motion the process should the money be needed.

“The Governor has approved a plan that will allow me to put in place a line of credit that the Treasury may or may not tap into, depending on cash flow needs,\’\’ Nappier said. \”At present, the timing of any drawdown is not exact.  Given the growing deficit projections and continued pressures on cash, I thought it prudent to take this precautionary measure.  And without a budget reserve fund – which was virtually depleted in 2010 – this line of credit is essentially a low-cost buffer that makes sense given everything that we’re facing.”

Nappier\’s request was one more piece of grim budgetary news received by Malloy in recent days. On Monday, state comptroller Kevin Lembo estimated the state\’s budget deficit at at least $415 million and said the number could grow even larger by the end of the fiscal year on June 30.

The Malloy administration said fiscal choices made in years past has left it little choice but to grant Nappier permission to seek the lines of credit if she deems it necessary.

\”While not something that is undertaken lightly, this action is necessary because of financial decisions that were made over a long period of time,\’\’ said Andrew Doba, Malloy\’s communications director.

\”The state’s failure to convert to GAAP, the exhaustion of the rainy day fund and the decision to borrow to cover operating expenses all contributed to the state’s low cash flow.  Allowing access to this line of credit will make sure that service providers and contractors are paid on time for the hard work they do,\’\’ Doba said.

Republican legislative leaders said the move signifies a \”new phase\” in the state\’s fiscal problems.

\”The State of Connecticut\’s finances have deteriorated to the point where we are no longer just using money from bond issuances to defray operating costs, but are now faced with the prospect of resorting to lines of credit to meet our obligations,\’\’ House Republican Leader Lawrence Cafero said. \”We have reached a new phase: outright borrowing to pay operating expenses.\’\’

Doba noted that Republican Gov. M. Jodi Rell, Malloy\’s immediate predecessor, took a different approach when faced with a shortfall in 2009.

\”In that case, the state used bond funding to cover operating expenses.  We are not doing that,\’\’ Doba said. \”This is a short term line of credit that will cost the state relatively little and allow necessary payments to be made if the treasurer elects to access it.”

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10 thoughts on “Gov. Malloy Authorizes Lines of Credit Up to $550M; Will Be Tapped if Needed

  1. Richard

    Scott Walker’s Success: He freed the slaves.

    “[Membership in] Afscme Council 24, composed of state workers, fell more than two thirds to 7,100 from 22,300 last year.

    A key reason that membership dropped was because the labor law, championed by Republican Gov. Scott Walker, forbids automatic collection of union dues. Instead, workers must voluntarily say that they want to continue to continuing paying dues to remain members of the union.”

    http://tinyurl.com/7r3yd6l

    Disempower the unions!

    Walker’s (Milwaukee’s) school voucher program (A District within the District) is as large as Hartford’s School System.

    Shudder. It’s a non-union District. 85% religious Schools. As with the union dues gone missing its a product of Choice. Give tax-payers a choice and they flee Union Dues and Union Facilities and don’t go back.

    Can we see those food stamp applications in triplicate at piled up at DSS again?

    There’s a huge hole here for the GOP to drive through. Vouchers. Jerry Brown-style Pension Reform to eliminate pension spiking schemes, all but eliminate haz duty pensions (age 55) and capping pension eligible salaries. Union Dues. Changing the hiring and firing seniority racket. Firing the Lords of COBOL at the Department of Information Technology. DOIT seems to think its the preserver of old and ancient languages and antique technology and business practices. The makers of triplicate forms for Food Stamps love them!

  2. Da Troof

    More proof of the never-ending tax, spend, and borrow cycle that is the hallmark of Connecticut politics. Spending money we don’t have for idiocy like the busway, an unsustainable state workforce, and the entitlement state has finally caught up to us.

    We get the Government we deserve. Keep voting Democrats and liberals and watch the death spiral continue.

  3. MrLogical

    The ship of fools known as the Good Ship Connecticut, under the leadership of Cap’n Dannel “man the pumps!” Malloy is headed for shallow waters and a high wind is rising. The coming months won’t be pretty unless the Cap’n unladens his vessel and steers a course for deeper water.

    Regrettably, it’s very likely he won’t.

    Just hide and watch, and be prepared to get out that checkbook.

    See you all in Florida.

  4. Alpinglow

    Attaboy, Larry!
    Never pass up an opportunity to knowingly misrepresent the facts and demagogue the issue!
    You are a true Republican, fella!

    1. Da Troof

      Actually, Larry was right on the money. What part of our state and country is broke don’t you get? Please enlighten us with facts that dispute this. Doubling down on taxing, spending, and borrowing will hasten our demise which is inevitable given our current fiscal trajectory.

  5. Kim

    The question being ignored by the pols is: if we borrow money to make the upcoming payments, what will we do the next time the payments come do?

    Like Da Troof says: BOHICA.

    The obvious solution? Negotiate another deal with the unions to increase their pay and benefits AND protect them from layoffs for another few years. This, of course, will ‘feed’ more money into the economy as they spend their increased income on local businesses.

  6. Sarah Wright

    The inmates are running the asylum! And, the asylum is way too big for the size of our state. It will take a non-political team of cost cutters to put the numbers together and implement a plan for near and long term fiscal success. The politicians are grossly incompetent, regardless of party. All are jockeying to protect their own special interests. We don’t need spin doctors. We need emergency, skilled surgery. By the way, does it strike anyone else as strange that Denise Nappier makes more than the governor? What’s going on there? As a business person who is on the outside looking in, I am disgusted.

  7. Lee

    We are screwed, and it is time to consider a more people and family friendly state. California and New York are models that we are following. Texas is a good place to consider.

  8. Pingback: Ryan & Fisher: Checking out Santa’s Connecticut Christmas list | NCAdvertiser.com

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