The treasury began issuing the first loans last week.
State Treasurer Stacy Garrity announced a budget impasse loan program last month. With the state’s budget over three months late, the program will loan $500 million from the state’s short-term investment pool to certain counties and social service agencies that have not received their state appropriation.
Garrity is confident that the loan program is legal. The treasury began issuing the first loans this week.
She announced this week that the first $3.9 million of the loans went out this week, with another $9 million expected to be sent soon.
The loans have an interest rate of around 4.5%.
A heated debate in the Senate last week questioned Garrity’s authority to invest state funds. The GOP majority moved to pass a bill that would allow her to make zero-interest loans for budget impasses into 2027.
Senate Democrats argued that Garrity was overstepping her legal authority regardless of the interest rate charged, saying that the loans are functioning as appropriations despite only the legislature having such power under the state constitution.
“It’s not a question of whether we possess the legal authority to do this, as the Pennsylvania Fiscal Code grants my office exclusive and broad authority to commit the funds of the Commonwealth to prudent investment strategies, including interest-bearing financial instruments, such as lines of credit and short-term debt obligations,” Garrity said in a recent email.
“What should be called into question is why certain members of the General Assembly are not supporting Senate Bill 1040, which would remove any interest on Budget Bridge Loans for the many organizations who are taking advantage of this effort to help them continue services for our most vulnerable Pennsylvanians,” she continued.
The loans administered this week went to Bradford-Tioga Head Start, Child Advocates of Blair County, and the Pennsylvania Coalition to Advance Respect, the umbrella group for the state’s 48 local rape crisis centers.
Joyce Lukima, PCAR’s director and chief operating officer, said the loan “puts us in a position where we’re able to provide local rape crisis centers in Pennsylvanai with 88% of the funds they should’ve received already for July, August, and September.”
The money for the loans comes from the state’s Liquid Asset Pool, which consists of short-term investments of operating cash from several state accounts.
State code gives the treasurer’s office broad powers to invest public funds in a prudent manner, and the treasury has put state money into stocks, bonds, and private equity capital.
The loan program will continue in the absence of any legal action and a state budget in place to deliver necessary funds.
