Loan paid by borrowing?

Late last night, Gov. Steve Beshear announced that the state has paid the $28 million interest payment that was due to the federal government by September 30, 2011. The state's loan has been used to pay for unemployment insurance benefits.

On one hand, Kentucky businesses dodged a big bullet. Without the commonwealth paying the interest, Kentucky businesses would have footed the penalty bill. They would have to pay roughly $400/worker, a cost totaling over $600 million.

The problem? How the money was paid. The commonwealth has again borrowed money from itself to pay the federal government. The governor took an "internal loan" to make up the difference needed for the interest pyament. While the governor has claimed budget surplus, how is it that the commonwealth continues to borrow funds from itself?

Sen. David Givens, R-Greensburg, questioned the governor's move: "I'm disappointed because basically what we've done in Kentucky is written a check for an account that doesn't have sufficient funds in it."

While in the short term, the problem has been addressed, how will Kentucky fare in the long run? Continuing to borrow more money we don't have doesn't seem promising to me.