As reported in today’s Wall Street Journal, the state may re-enter the short-term credit markets for the first time in two decades in order to cover a cash shortfall in June.

The possibility was first raised in a forum at the Rockefeller Institute last week by Assemblyman Herman “Denny” Farrell, chairman of the Ways and Means Committee. “We are going to have to borrow, and we’re going to have to borrow in the next couple of weeks in my opinion,” Farrell said.  Even if a budget is adopted in the meantime, the state is expected to have roughly $1 billion less than the cash it needs to pay its bills in June, including a large school aid payment.

But short-term borrowing by the state is restricted under the 20-year old statute creating the Local Government Assistance Corp. (LGAC), which effectively converted the state’s rolling short-term “spring borrowing” into long-term debt.  Here’s the relevant language from the Public Authorities Law (Article 10-B, Title IV, Section 3241-A, Subdivision 2):

The state may issue in any fiscal year tax and revenue anticipation notes in an aggregate principal amount in excess of the limit on issuance set forth in subdivision one of this section [the $4.7 billion in long-term borrowing originally authorized for LGAC], if and only if there shall have first been executed in such fiscal year a written certificate signed by the governor, the temporary president of the senate and the speaker of the assembly, which shall set forth:

(a) the emergency or extraordinary factors or factors unanticipated at the time of adoption of the budget for the fiscal year in which such borrowing is to be made that gave rise to the need for the issuance of tax and revenue anticipation notes in excess of such limit, and

(b) the amount of tax and revenue anticipation notes projected to be issued in each of the three fiscal years commencing subsequent to the fiscal year in which such limit was originally exceeded, which will result in the elimination of such excess as soon as practicable but in no event later than by the end of the third fiscal year commencing subsequent to the fiscal year in which such limit was originally exceeded. [emphasis added]

In addition, that emergency certification can’t be issued for more than four consecutive years.

The possible issuance of short-term revenue anticipation notes is not to be confused with the possibility of longer-term “transitional” deficit financing, as proposed by Lt. Gov. Richard Ravitch’s long-term fiscal reform plan.  Gov. Paterson has reacted coolly to the Ravitch plan; in fact, in what surely be a first for the Empire State, the plan has inspired the governor to publish a New York Times op-ed critical of an idea floated by his own appointed lieutenant.