Massachusetts may be forced to ante up a $7 million interest penalty on a federal loan next Wednesday, if the state legislature does not approve this week the sale of $700 million of revenue bonds in time to meet a payment deadline.
The state borrowed the money to finance its state unemployment benefits fund.
The debate on the bonding bill is scheduled on the legislative calendar for next Wednesday - too late to pass the measure, sell the bonds, and pay the loan on time. The legislature is in session now, but many lawmakers are not in Boston, the state capital. And lawmakers are expected to break for the weekend and Rosh Hashanah on Monday and Tuesday.
However, Joseph Blair, director of the Massachusetts Industrial Finance Agency, said yesterday that lawmakers may be called into an emergency session today or tomorrow by House Speaker Charles H. Flaherty. D-Cambridge. The agency would sell the bonds.
Mr. Flaherty and his staff could not be reached for comment.
If the measure is passed today or tomorrow, the sale would have to take place on Monday and close on Tuesday if the state were to make the payment and avoid the interest charge, Mr. Blair said.
State Senate President William Mr. Bulger, D-Suffolk, said, "If the sale of the bonds will save the commonwealth a significant amount of money, then I suspect we will do whatever it takes to push the authorization through.
"The attitude in the state House is that politics is secondary to saving money," the Senate president said. "I can see the bill being passed by the end of the first formal session" whenever it may start.
Since 1991, the state unemployment benefits fund has been forced to borrow as much as $5 million per day from the federal government to pay benefits for the state's unemployed. Massachusetts has been hard hit by the regional recession. In August, the state unemployment rate was 8.3%.
States that borrow from the federal government must repay the loan in full by the last day of September of each year or face interest charges. If paid by Sept. 30, borrowing is interest-free.
Recent stories in The Boston Globe and The Boston Herald have reported political infighting over the selection of the bond syndicate's senior managers for the $700 million offering.
Legislative and executive leaders have refuted those charges, however, saying lawmakers want to continue moving in the positive direction the state's economy has taken.
Mr. Blair said the borrowing would place no tax burden on the taxpayers, because the bonds will be secured by increased contributions from industries and businesses in the state.
"Secretary of Economic Development Stephen P. Tocco and Secretary of Administration and Finance Peter Nessen have very recently expressed the administration's continued support for the issue," Mr. Blair said.