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 M. 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.
Time is running short, however.
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' salaries, nursing homes, law enforcement, cities, counties, school districts and every other state-funded service, Treasurer Bill Lockyer said.
Tom Dresslar, Lockyer's spokesman, said the treasurer hopes that Friday's congressional vote will solve the problem.
"We'll see how the market reacts," Dresslar said.
California 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 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.
Meanwhile, 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.
"One of the avenues we will continue to explore is obtaining a loan from the federal government," Lockyer said.
Former Gov. Gray Davis, a Democrat, supported the notion in an interview Friday on the FOX Business Network.
"I think the governor was right to alert the Treasury...Short-term borrowing is normal," Davis said. "What is abnormal is the economic times we live in. The state is literally running out of cash."
Controller John Chiang said he is "cautiously optimistic" about the rescue plan but will continue working with Lockyer and Schwarzenegger to "ensure no critical public services and programs are placed in jeopardy."
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 a budget deal was struck this month, California needed to borrow very quickly - and the nation's lending crisis slammed that door shut.
Schwarzenegger has scheduled a meeting Wednesday with legislative leaders to discuss the state's cash-flow problems.
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