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California borrow record 11b { May 2 2003 } Original Source Link: (May no longer be active)
http://www.washingtonpost.com/wp-dyn/articles/A6080-2003May2.htmlhttp://www.washingtonpost.com/wp-dyn/articles/A6080-2003May2.html
Cash-Poor California to Borrow Record $11 Billion
Reuters
Friday, May 2, 2003; 2:52 PM
SAN FRANCISCO (Reuters) - California will issue $11 billion in short-term debt this spring, an amount state officials called a nationwide record, to pay its bills while legislators try to devise a budget for a state facing a revenue crunch.
"We are borrowing $11 billion so California will be able to pay its bills into the start of next fiscal year," State Controller Steve Westly said in a statement. "However, without a budget, we'll face another cash crisis and legal restrictions on which bills can be paid.
Gov. Gray Davis must present a revised budget plan this month based on vital April tax revenues before the legislature can try to hammer out a budget by the beginning of the fiscal year on July 1. Lengthy budget battles are common, however, and last year lawmakers took until September to hammer out a final spending plan.
"Everyone in the Capitol needs to be aware that this is a short-term cash solution. It does not solve the budget crisis and it does not eliminate the need for an on-time budget."
Last month, Westly said the state would borrow between $9 billion and $11 billion to help repay an outstanding $12.5 billion note sale and to ensure the state had enough cash when the new fiscal year begins on July 1.
The figure of $11 billion is the maximum allowed under state budget formulas for the spring. Last spring, California issued what was then a record $7.5 billion of the so-called revenue anticipation warrants, which are repaid in the next fiscal year, to ensure the state had enough cash.
"We believe it is the largest of this kind of borrowing nationwide," an official in the Controller's office said. "We're not proud of it."
The announcement follows approval by the California state legislature on Thursday of a $4.6 billion package of budget cuts and pension bonds. The plan, passed in both the Senate and the Assembly with little debate, would save $3.6 billion in fiscal 2003-04 and about $1 billion the following year.
Also on Thursday, the California Supreme Court ruled that state workers paid by the hour should get only minimum wage of $5.15 if a budget is not passed by July 1.
Westly said he would travel to New York later in the month to talk to investors and rating agencies about the borrowing. The state expects to receive the money in early June.
California's budgetary woes stem from a weak economy and a lackluster stock market that have hurt tax revenues and left the state facing a shortfall estimated at between $26 billion and $35 billion over the next 13 months.
The crisis has already led to costly credit downgrades.
© 2003 Reuters
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