(Adds further details, comment from comptroller)
NEW YORK, Dec 17 (Reuters) - California State Treasurer Bill Lockyer said a panel was forced on Wednesday to halt $3.8 billion in loans for infrastructure projects because the state needs the money to pay for vital public services.
The announcement came as Republicans and Democrats in the state remain deadlocked over how to close a budget deficit that is expected to grow to more than $40 billion.
“It’s now official -- the failure to solve our budget problem has put in grave danger billions of dollars in revenue for our businesses and thousands of jobs on which our workers and families depend,” Lockyer said in a statement.
The state’s Pooled Money Investment Board (PMIA), comprising Lockyer, State Controller John Chiang and State Director of Finance Michael Genest, voted to stop the funding until June 2009.
The decision will impact almost 2,000 projects including highways, schools, levees, housing and parks, he said.
The funds that the PMIA usually lends to infrastructure projects is replenished via state bond sales. But the credit crunch and the state’s budget problems have effectively closed the bond market to California, said Lockyer.
“With the State unable to sell bonds, continued lending for infrastructure projects would substantially reduce the resources available to the PMIA to keep the State afloat,” he said.
“The Legislature must act quickly to resolve the State’s structural budget deficit or we face even more fiscal pain,” Controller Chiang said in a statement.
General fund revenue was $1.3 billion below estimates in November, he said. In the last four weeks alone, as lawmakers have argued about cost cuts versus tax hikes, the state has lost half a billion dollars.
“California’s economy will not restart on broken roads. It will not recover in substandard classrooms. It will only thrive with the infrastructure necessary to face tomorrow’s challenges,” he said.
Reporting by Ciara Linnane