PROVIDENCE — On Monday, the state was forced to draw $25 million out of a temporary disability insurance fund — financed by mandatory payroll contributions by private sector workers across the state — to make a promised school-aid payment to the cities and towns.

This was not the only time in recent years the state’s money managers felt compelled to borrow from the TDI fund.

But with a $33.6-million deficit left on its books from last year, no cushion to fall back upon and a dropoff in sales and income tax collections in recent months, state Treasurer Frank Caprio put Governor Carcieri on notice in August that the state was likely to run short of money to pay its bills “on several dates throughout the remainder of the fiscal year 2009.”

Carcieri immediately put legislative leaders on notice of the likely need to borrow from the state-run disability-insurance fund earlier in the state’s budget year than anyone could recall. In one such letter to Senate Minority Leader Dennis Algiere, the governor noted that he can only do so when: “All cash in the General Fund, including the payroll clearing account has been or is about to be, exhausted.”

But push didn’t actually come to shove until late last week when the state’s money managers realized that after paying $84 million in Medicaid bills on Friday, the state was about to find itself $24.6 million short of what it needed to make a $70-million municipal school-aid payment due on Monday.

So dipping into the TDI fund averted a potential crisis, or more literally: a lockout by state’s new financial management system.

And it left a total of $64.5 million in a state-managed fund that took in a total of $175,440,172 last year, and still had $98,898,706 left after paying out $176,833,754 in disability claims over the year. Approximately 420,000 private-sector employees in Rhode Island, and some municipal employees, pay 1.3 percent of their gross wages — up to a maximum wage base of $54,400 — into the TDI trust fund.

With a payroll due tomorrow, the state is not out of the woods yet, however.

Yesterday, state budget officer Rosemary Gallogly sent the chief financial officers and administrators of every department in state government a memorandum that said: “Cash flow is very tight causing us [to] borrow from the TDI fund to meet General Fund obligations. While this is authorized by law, we need to do everything we can to bolster the General Fund’s cash flow over the next month until we can issue Tax Anticipation notes.

“Please look at all your federal accounts and draw down as much as you legally can to cover any red cash balances. We cannot afford to float the federal government any cash for federal programs.”In other words, the state is lurching from pay period to pay period in an atmosphere of increasing uncertainty about the state’s ability to raise the revenue that the governor and legislative budget-writers anticipated when they cobbled together this year’s budget.

In an interview yesterday, Gallogly said she does not view the state’s predicament as a “crisis,” but rather as a “period of stress” because state law provides “tools” — such as the authority to borrow from the TDI fund — at those times when the cash coming in isn’t enough to cover the state’s payment obligations, as last happened in November 2007.

With no opening surplus, “that doesn’t give you much of a cash cushion,” she said. But “given that we have tools to handle dealing with the state’s cash flow,” Gallogly said cash flow is not “one of my worrisome issues because there is so much else going on nationally and with Wall Street for me to worry about.”

And she said her e-mail alert yesterday was simply a reminder to the state CFOs of something they already know: that the state shouldn’t be paying out of its own coffers the salaries of people hired under the auspices of a federal grant.

Caprio’s deputy chief of staff Xaykham Khamsyvoravong explained further: “Because the state’s newly implemented accounting system (RIFANS) is now programmed to shut down an agency’s account when it gets down to a zero balance, keeping cash in the account is particularly important to the function of an agency.”

But Gallogly acknowledged she is “definitely concerned about meeting our revenue estimate.”

The financial results for September are not yet in, but a falloff in both sales and income tax collections — the two largest sources of state revenue — contributed to a 2.6-percent dropoff in overall tax revenue in July and August, compared to a year earlier.

Income tax receipts were down by 1.5 percent during that two-month period that marked the start of the state’s current budget year; and sales taxes were off by 2.8 percent after a grim summer at the Division of Motor Vehicles, where the sales taxes collected on car sales fell by 15 percent in July, and by 16.8 percent in August from what they were last year.

kgregg@projo.com