PROVIDENCE, R.I. -- The state may not have to dip into its temporary disability insurance fund after all to pay its end-of-the-month bills, including a promised school-aid payment to the cities and towns.

Last week, Governor Carcieri put legislative leaders on notice that the state was almost out of money, and would need to once again borrow money -- up to $50 million -- from the $90.4 short-term disability fund financed by mandatory payroll contributions by private sector workers across the state. Workers pay 1.5 percent of their first $56,000 in compensation.

In his July 22 letter to key lawmakers, Carcieri wrote: "All cash in the General Fund, including the payroll clearing account, has been or is about to be exhausted. The anticipated cash expenditures exceed the anticipated cash available... Our projections indicate that a transfer from the Temporary Disability Fund for the remainder of the fiscal quarter ending Sept. 30, 2009 would be warranted.''

The letter went to House Speaker William J. Murphy and Senate President M. Teresa Paiva Weed, among others.

As of Tuesday morning, there was only $90,223,279.47 left in the state's General Fund, with $113 million in payments "going out at the end of the month, including $88 million in local aid,'' according to reports from state treasurer's office and budget officer Rosemary Gallogly.

By mid-day, however, state Treasurer Frank Caprio's chief of staff Mark Dingley was issuing assurances the state would be able to pay all of its bills, without any interim borrowing, between now and mid-August, when the state plans to go to the money market to raise $350 million from the sale of tax-anticipation notes.

The state is going to the market early this year to take advantage of favorable interest rates, Dingley said.

In a joint telephone interview, both Dingley and Gallogly said the governor put the lawmakers on notice of the potential need to borrow from the TDI fund, because advance notice is required, and doing so gave him one more tool in the event the market sours or the state finds itself in an even tighter bind than it is in now.

But Dingley said that was never the preferred route, because the state is required to repay any money borrowed from the TDI fund with interest equal to what it would have earned had it been invested, while TANs are sold at 11-month rates that state officials hope and assume will be lower.

Added Caprio is a statement from his office: "TANs are used to cover operating costs in the state budget through the fall and winter months, until the larger corporate and individual tax collections arrive in the spring... In the past, we have been very successful in offering these bonds and they have proved popular with both local retail and the larger institutional investors.''

Caprio noted that the $350 million in TANs the state sold last year, at a rate of 2.2 percent, were repaid in full with interest on June 30, 2009. "The expected rate in August will be less than 1 percent, subject to market fluctuation, saving the state substantial interest expense," he said, noting the requirement that they too be repaid in full by the end of the current budget year.

But the money-in, money-out balance will be very close.

After paying all of its end-of-month bills, the state will begin the first Monday in August with little more than $1 million in its General Fund, and more specifically a projected $1,582,874.

By the next day, however, the balance is likely to grow to $6.264.962, and each day after, by more, Dingley said.

Extra: Read a memo from administration director Gary Sasse to state department directors and agency heads regarding discretionary spending

-- The Providence Journal has been following this story today as it develops. Our initial report was published at 12:30 p.m.