California has secured commitments for nearly $4 billion in short-term loans thanks to unprecedented demand from individual investors Wednesday, averting a need for federal assistance and allaying fears of a cash shortage.

While California will have enough cash to pay its bills through February, leaders have not resolved the state's revenue problem, a result of an economic slowdown.

California secured orders for $3.92 billion in short-term bonds from individual investors Tuesday and Wednesday, 98 percent of its original $4 billion goal, according to state Treasurer Bill Lockyer.

The state will try to obtain an additional $580 million today when it offers bonds to institutional investors, such as banks and insurance companies.

As Wall Street collapsed last month and credit markets froze, state leaders feared California could not obtain its annual multibillion-dollar loan. Gov. Arnold Schwarzenegger wrote a letter to U.S. Treasury Secretary Henry Paulson explaining that California might need to seek a federal loan as a last resort.

This week's bond sale reassured state officials that traditional lending markets would suffice.

"We're pleased," Lockyer said. "No one knew what to expect, so we're glad that Californians responded so well."

Lockyer said the state has authority to obtain up to an additional $1 billion today, although he believes obtaining roughly half that amount from institutional investors – for a total of $4.5 billion this week – is a realistic goal.

The state needs a short-term bridge loan, as it has for nine of the past 10 years, to ensure it has enough cash until it receives the bulk of its tax receipts in the spring.

California needs to raise $7 billion total by spring. Lockyer said he does not know when the state will pursue another round of bonds.

This week's demand from retail investors was unprecedented. Such investors made up a minority stake of California bond sales in nearly all past offerings.

Lockyer promoted the sale through a California bonds Web site, while Schwarzenegger taped a radio ad and bought $100,000 in bonds to encourage residents to lend money to the state.

California offered attractive yields, setting projections at 3.75 percent for bonds maturing May 20 and 4.25 percent for bonds maturing June 22. Those rates are higher than the 3.37 percent the state paid last year on its $7 billion bridge loan.

With the stock market undergoing high volatility, investors have been looking for a more stable place for their money.

"People are putting money in Treasury bills because the turmoil in the market has them freaked out," said Alex Anderson, portfolio manager of Los Angeles-based Envision Capital Management. "(Municipal bonds) have a historically low default rate, and though we expect it to go up as some turmoil seeps in, munis are still viewed as safe instruments."

Schwarzenegger and legislative leaders last week portrayed the state's fiscal situation as a two-pronged problem and said obtaining $4 billion in cash was a more immediate need than resolving the revenue issue.

They still expect $3 billion less in tax revenues through June than anticipated in the budget they enacted last month. They spoke by telephone for a half-hour Wednesday, mostly receiving updates on the Southern California fires and the cash situation, according to Schwarzenegger spokesman Aaron McLear.

They did not agree Wednesday to any specific solutions for closing that budgetary gap, though they plan to continue talks in future weeks.

Call Kevin Yamamura, Bee Capitol Bureau, (916) 326-5548.