It's a rite of summer as constant as the song of an ice cream truck.

The calendar ambles past July 1. The American League wins the All-Star Game. Central Valley temperatures flirt with triple digits.

And California government starts mooching Cyndy Mulhern's fruits and vegetables.

"Right now, they owe us about $360,000 for July," said Mulhern, who with her husband, Michael, owns Superior Produce, which operates from a warehouse off 16th Street, less than two miles from the Capitol. "And we're still paying all our bills … we've got one more week left before we're out of money."

Her biggest customer isn't, at least not yet, according to the state controller's office.

But until legislators and Gov. Arnold Schwarzenegger agree on a new budget, thousands of companies doing business with the state are getting stiffed.

Under various state laws and constitutional provisions, the controller is prevented from paying vendors for goods and services provided after July 1, when the state's new fiscal year begins.

Knowing that, said Hallye Jordan, spokeswoman for Controller John Chiang, state departments and agencies don't even bother to forward claims and invoices for July.

"If they did send us a claim," she said, "we'd just send it back unopened."

The state does plenty of business with business each year – $9.38 billion in 2006-07.

The Mulherns' Superior Produce has had state contracts almost since the company's inception in 1988, providing produce to Northern California prisons.

Most of the time, Cyndy Mulhern said, the relationship is very good, and the company's invoices get paid promptly.

"But when this budget thing happens," she said, "it goes right out the window."

"This budget thing" to which Mulhern refers is the penchant of California's elected leaders to reach the start of the fiscal year without a budget in place: They've missed it 17 of the last 21 years.

When they delay, it means trouble for the Mulherns.

In 2002, a month after they paid off the mortgage on their east Sacramento home, the couple had to take out a $250,000 line of credit on the house. Before the budget was settled, the state had piled up about $450,000 in unpaid bills.

In 2004, the budget fight saw $122,000 in unpaid bills pile up on the company's desk.

And this year has the potential to be the worst yet. The Mulherns recently sold the part of their business that catered to restaurants, and 90 percent of Superior's income now comes from contracts with state prisons.

In addition, their state contracts prohibit them from imposing a fuel surcharge, so the firm is eating the soaring price of diesel for its trucks.

For the first time, Mulhern said, they had to ask some of their suppliers in July for more time to pay their bills.

She said the company has about $70,000 in the bank, with weekly payments to vendors amounting to about $80,000. Meanwhile, they are filling $10,000 orders to Folsom State Prison three times a week, and not getting paid for it.

"We will probably go into the line of credit in two more weeks," she said. "We can probably get most of the bills in (this) week, and then after that, we're done."

Since 1983, the state has been required to pay late payment penalties to vendors with contracts of $500,000 or less and nonprofits.

In the 2006-07 fiscal year, the state paid 14,000 late payment penalties, totaling $2.2 million. Not all of that is due to protracted budget fights, which the state doesn't break out from late payments throughout the rest of the year.

But Mulhern said the prospect of penalty payments doesn't make up for the ulcer-inducing uncertainty, nor is it a good way to do business.

"We were paid $12,000 in penalty fees" in 2002, she said. "That's $12,000 the taxpayers are stuck for because the Legislature and governor couldn't do their jobs."

But payment delays are only part of a triple budget whammy being faced by organizations that provide Medi-Cal-funded services.

As of July 1, the state's Medi-Cal reimbursement rates, already among the lowest in the nation, were cut an additional 10 percent. The governor and Legislature approved the cuts in February as part of the effort to stanch the budgetary red ink. The cut is being challenged in a lawsuit filed by a coalition of health care providers.

In addition, a special reserve fund to tide clinics over through September ran out a week ago.

"We have bills we have to pay, like the rent and utilities," said Liza King, CEO of Health For All, a Sacramento group of three clinics and two adult day health care centers that provide services to low income children and seniors.

"Some bills we can put on the back burner and just pray for a miracle."

Last year, King said, the company survived by taking out a $300,000 short-term loan. This year, they have applied for another loan. And in a pre-emptive strike, Health For All closed its Auburn center in late June.

"We knew what was coming up, and there was no way we would have been able to survive it, there was just no way," she said. "So we cut the payroll by a third in order to get through it."

By law, the controller's office has 15 days to pay the backlogged claims and invoices once they are received. Last year, it took 10 days for three shifts of controller's office workers, working literally around the clock, to process payments.

The 52-day standoff resulted in more than 60,000 unprocessed claims totaling more than $3 billion in late payments to vendors and Medi-Cal providers.

For many companies that do business with the state, the annual budget battle has become just another disagreeable fact of life.

"It definitely was one of the concerns we had going into this business," said John Riley, co-owner of Sacramento Technology Group, a 7-year-old company based in Folsom that provides security and data maintenance and salvaging services.

"It does seem to happen fairly frequently."

Riley estimates about 25 percent of his firm's annual revenues comes from state contracts.

And budget delays notwithstanding, Riley said the firm would like to expand its business with the state, mainly because it represents a big and more-or-less reliable customer.

"I haven't seen a state file for bankruptcy yet," he said.

He emphasized "yet."

Call Steve Wiegand, Bee Capitol Bureau, (916) 321-1076.