I agree with your comparison of Arizona's move with check-kiting. There is a little more to it.
States have special purpose funds, set by law, and sometimes funded by dedicated taxes, or restricted Federal funds, or tolls, etc. Because these funds are under control of the State, they are sometimes used to pay expenses of the depleted General Revenue Fund. The last Governor of Illinois regularly funded deficits with account "sweeps"; viz., he took balances from special purpose funds which were administered by the State.
An example: a health insurance fund for local governments, libraries, etc., is administered by the State in order to get a lower premium than the entities could obtain by themselves. When the State saw a balance accumulate from the premia of local government employers and employees, it swept the money into the State's general fund and spent it. Payment of health insurance claims, for which members had accumulated a sizable reserve with their own money, was then delayed until the State came up with new money to replace the gutted reserves.
Reading between the lines, from afar, I suspect that Arizona had already swept the special purpose funds before they went to an outside lender. At the end of the day, the State robbed destitute local units. |
