Pawlenty administration officials hope to solve the state’s cash flow problems without borrowing money – but they’ll be ready just in case.
Minnesota Management and Budget Commissioner Tom Hanson said his agency will move forward with a request for proposals to borrow money from private lenders to cover projected cash flow shortages in the current biennium.
Speaking to the Legislative Advisory Commission, Hanson said the state will probably resolve cash flow deficits this spring largely by delaying payments to school districts; however, he said “the jury is still out” on whether borrowing will be necessary in the next fiscal year, which begins July 1.
“We have the benefit of a little time here to think this through,” Hanson said. (Watch the meeting.)
State Budget Director James Schowalter said the state will need to raise about $550 million to cover expenditures between March and May. To do this, he said the state will delay $423 million in payments to school districts and $52 million to the University of Minnesota, as well as hold back $60 million in corporate and sales tax refunds.
The delayed payments and refunds will be repaid by June; however, Schowalter said that even if lawmakers resolve a projected $1.2 billion budget deficit in the remaining biennium, the state will likely face more cash flow shortages beginning late this summer. This may force the state to borrow money either by issuing certificates of indebtedness or establishing a line of credit with a financial institution.
MMB is scheduled to release its request for proposals Thursday. Responses are due Feb. 18, and will be evaluated later this month. Hanson and other MMB officials will appear before the commission again to discuss whatever borrowing proposal they settle on.