California is continuing to jockey for a multibillion-dollar emergency federal loan despite Friday's congressional approval of a rescue plan for the nation's troubled credit market.
"We're not out of the woods yet," Gov. Arnold Schwarzenegger said.
The governor had sent a letter Thursday to Treasury Secretary Henry Paulson warning that the state may be forced to turn to the federal treasury for help if it cannot quickly secure a short-term loan for up to $7 billion.
State officials hope that approval of the $700 billion national plan will loosen credit quickly, making it possible to borrow from traditional lenders the billions it needs this year – and annually – to bridge gaps until revenues flow in the spring.
California is projected to exhaust its reserves – and dip $1.5 billion into the red – by Oct. 29 unless a short-term loan can be secured.
"If we can't get that loan through the normal course, we will go to the federal government and ask for help," Schwarzenegger said Friday. "And we have already set that in motion."
Without a cash infusion, California could be forced to stop or delay payments next month for teachers, nursing homes, police, cities, counties, schools and other state-funded services, Treasurer Bill Lockyer said.
Tom Dresslar, Lockyer's spokesman, said the treasurer hopes Friday's congressional vote will solve the problem. "We'll see how the market reacts," Dresslar said.
The state needs $7 billion to solve its cash-flow problem through June 30.
Lockyer will test the credit market the week of Oct. 13 by offering a lesser amount of short-term securities, perhaps $3 billion to $4 billion, through Banc of America Securities and Goldman Sachs. "But there are no guarantees" the newly approved federal rescue plan will permit a "deal at the best price for taxpayers," Lockyer said in a written statement Friday.
Lockyer and Schwarzenegger are weighing alternatives, including the possibility of striking a short-term deal to borrow from pension systems for state employees or teachers – or from the federal government.
California's record 85-day budget standoff compounded its cash-flow problem. The state could not sell short-term securities, known as revenue anticipation notes, until it had adopted a state budget. By the time it had, California needed to borrow very quickly – and the nation's lending crisis slammed that door shut.
The governor scheduled a meeting Wednesday with legislative leaders to discuss the state's cash-flow problems.
Call Jim Sanders, Bee Capitol Bureau, (916) 326-5538.
