California cash covers state bills through June
SAN FRANCISCO (Reuters) - California will not need to borrow an additional $1.5 billion from Wall Street and has enough cash to meet all its payment obligations in full through June, or the end of its current fiscal year, the state controller said on Tuesday.
Earlier this year, California's state government was on the verge of running out of cash, and required officials to withhold tax refunds along with payments to local governments and vendors.
The crisis eased in February when Gov. Arnold Schwarzenegger and lawmakers agreed to a budget deal that closed a shortfall of more than $40 billion.
A recent $500 million note from Golden 1 Credit Union, internal borrowing and federal stimulus aid further bolstered the state's cash account.
"With sufficient cash on hand, we will be able to meet all of our obligations in full and on time, including tax refunds to California taxpayers and payments to private businesses and local programs that provide needed services to our most vulnerable residents," State Controller John Chiang said in a statement.
Chiang said the state government has already made $3 billion in delayed payments, including $2.2 billion in tax refunds.
Since the budget deal, California has received mixed financial news.
The most populous U.S. state's revenues will weaken along with its economy, which is suffering a 10.5 percent unemployment rate. A new budget shortfall is already forming and could swell if voters do not pass a number of budget-related measures in May.
Those measures seek a number of changes to the state's financial laws, including a state spending cap, extensions for tax increases in the budget agreement and approval to sell $5 billion in bonds backed by lottery revenues.
On the positive side for California, its highly-anticipated general obligation bond sale last week reaped $6.54 billion in orders, exceeding its original $4 billion limit, and underscoring investor confidence in the state.
State Treasurer Bill Lockyer increased the size of the sale in response to torrid demand from individual investors. He is planning another general obligation debt sale for next month.
Proceeds from last week's sale, will be used to resume public works projects halted in December during the state government's cash crisis and to launch new infrastructure projects within 30 to 60 days.
Transportation and flood control projects will be top priorities, in large measure because they create large numbers of jobs, State Finance Director Michael Genest said on Monday in a conference call with reporters.
