Warning that private lenders will look askance at smoke-and-mirrors accounting tricks, state Treasurer Bill Lockyer told a legislative committee today that lawmakers should rely heavily on spending cuts to balance the budget.
"It seems to me that the kind of budget we will require before the end of June is almost entirely comprised of cuts," Lockyer told the 10-member, two-house conference committee charged with fashioning a plan that eliminates a $24.3 billion deficit.
"My suggestion to you is don't delay the pain. It's going to be awful, but just get it done. It's going to be worse if it doesn't get done."
Lockyer said that past budget-balancing maneuvers such as tax anticipation notes, excessive internal borrowing and over-reliance on one-time revenue sources were distasteful to credit rating agencies and investors, and "have resulted in California having the lowest credit rating in the United States of any state."
Lockyer, a Democrat and former state Senate president, joined state Controller John Chiang and staffers from the Legislative Analyst's Office and the Department of Finance in outlining the status and likely future of state government's cash flow.
The consensus was it's bad and likely to get much worse.
Jason Dickerson, a budget expert from the analyst's office, said the state would end the current fiscal year on June 30 with between $5 billion and $7 billion - less than a third of the amount it had on hand at the end of the 2005-06 fiscal year.
Chiang said that by the end of July, the state would essentially be out of cash. Ana Matasantos, chief deputy finance director to Gov. Arnold Schwarzenegger, said that if lawmakers take no action to close the hole in the budget they adopted last February, the state would need to borrow as much as $23 billion by the end of December.
And Lockyer warned that the fragile condition of credit markets, the sagging national economy -- and the decision Thursday by Obama administration officials not to back California's borrowing instruments -- all conspired to limit the state's ability to borrow to no more than $10 billion for the 2009-10 fiscal year.
"The truth is we're not sure we could borrow $10 billion," he said.
All of the speakers urged legislators to come up with a budget-balancing plan by the end of June or risk being unable to pay the state's bills.
"We can't have July 4th fireworks going on in this building," Lockyer said.
Call The Bee's Steve Wiegand, (916) 321-1076.
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