 California will run out of cash by early March if the state does not take swift action to find $3.3 billion through payment delays and borrowing, according to a letter state Controller John Chiang sent to state lawmakers today.
The announcement is surprising since lawmakers previously believed the state had enough cash to last through the fiscal year that ends in June.
| Surprising. I do not think that word means what you think that word means... |
But Chiang said additional cash management solutions are needed because state tax revenues are $2.6 billion less than what Gov. Jerry Brown and state lawmakers assumed in their optimistic budget last year.
| So Jerry and the Clowns were over-optimistic on revenue... |
Meanwhile, Chiang said, the state is spending $2.6 billion more than state leaders planned on.
| ...and they failed to get spending under control. Yep, I can see why everyone is so surprised... |
The Assembly budget committee approved a bill today that would enable $865 million of borrowing from existing state accounts, Senate Bill 95.
| Thus moving money from one pocket to another... |
Chiang, after consultation with the Department of Finance and state Treasurer Bill Lockyer, is also seeking about $2.4 billion in delayed payments to universities, counties and Medi-Cal, as well as additional borrowing from outside investors.
| Thus stiffing the vendors, who are forced to do business with the state anyway... |
Absent these actions, the state would fall below its prudent $2.5 billion cash cushion on Feb. 29, Chiang estimated. On March 8, the state would actually end up $730 million in the red. The state would be below the safe cash cushion for several weeks ending April 13, save for several days at the end of March.
With such actions, Chiang believes the state would not have to use IOUs or delay tax refunds, maneuvers that have been relied upon in previous years. But Chiang also said that "more cash solutions may be required if our revenues continue to erode or if disbursements significantly exceed estimates."
| And golly, what are the chances of that? |
California borrows money early each fiscal year because the state has regular monthly expenses but receives the bulk of its tax revenues in the spring. The state borrowed $5.4 billion last fall for this purpose.
Assemblyman Bob Blumenfield, D-Woodland Hills, downplayed the significance of the new borrowing in a hearing. He said $5.4 billion was small relative to the $10 billion state leaders were prepared to borrow last year.
| That doesn't make the amount 'small'... |
Some Republicans raised questions about when the borrowing from state accounts from would be paid back and why the state is spending more than expected.
The Pubs are in the minority, and thus know the Dems won't touch that last one, except to say that "it's for the children" and "it's for green jobs" and "it's for high-speed rail something else"... |
Michael Cohen, chief deputy director of Brown's Department of Finance, said the state would pay back special funds whenever programs need the money to operate. Cohen also said the state is spending more money than expected because courts have blocked some cuts, while some savings may come later in the fiscal year than forecasters predicted.
| If the legislature wants to cut spending they can cut spending. Courts can't stop that. If they try, cut spending on the courts. |
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