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State avoids cash flow crisis – for now

The state has enough cash to pay its bills for the rest of the year, State Treasurer Dean Martin announced.

Martin’s office said July 13 that a cash-management plan the state is adopting would diminish, if not totally eliminate, the need to borrow money for day-to-day operations.

Martin earlier said the state could lack the cash to pay all of its bills this fiscal year.

The Treasurer’s office said the plan would “smooth out” payments to schools.

Instead of paying schools in seven payments during the first five months of the fiscal year, schools would now only get five monthly payments.

The new scheme essentially entails paying schools $1.7 billion instead of $2.2 billion in the first five months of the fiscal year.

The rest of the disbursements – about $1.3 billion – would be made over the rest of the fiscal year, according to deputy treasurer Mark Swenson, who added that schools won’t be negatively impacted by it.

Martin said his office recommended the plan, and the governor agreed to adopt it.

But Martin warned that that the state could be forced to make additional spending cuts, depending on the outcome of two ballot measures and whether Congress fails to act on sending extra healthcare funding to the states.

As part of budget-balancing measures, lawmakers last session approved proposals to eliminate an early childhood development program and take its money, as well as sweep funds reserved for preserving Arizona’s open spaces.

If voters in November reject those measures, spending will have to be “reduced immediately” to ensure the state’s cash flow projections remain on target, Martin said, noting the hit would be $448 million to the state budget.

He also cautioned that an additional $400 million in federal Medicaid money is at risk of being cut off.

“This is more than $848 million, or nearly 10 percent of the budget,” Martin said. “Spending reductions need to be identified now to make sure state agencies do not spend funds that may not materialize.”

Meanwhile, Swenson said revenue collection appears to have stabilized based on preliminary numbers for the first six months of the current calendar year.

The state collected roughly the same amount as the first six months of 2009 from major revenue sources, which was $2.95 billion, he said.

“We’re flat. Flat is the new up,” he said. “But you have to get to flat before you can start growing.”

2 comments

  1. No Effect on schools except they will have to borrow money to cover salaries and other M&O bills.????

    I guess Mr. Martin believes schools borrow money for free??

    Paul Roetto
    SMUDS Governing Board President.

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