Treasurer Bill Lockyer says that the 2008-9 state budget could be as much as $4.6 billion out of balance due to a sharp drop in revenues, demands by a federal court receiver for funds to improve prison health care and other "cash pressures."
Lockyer makes the disclosure in a lengthy document issued by his office of the state's desire to borrow $4 billion in short-term notes to ease a severe cash crunch. He and other state officials have worried aloud that with credit markets in turmoil and the state likely to run out of cash by the end of the month, the state's "revenue anticipation notes" may be difficult to market. Gov. Arnold Schwarzenegger has said the federal government may become lender of last resort, a possibility also cited by Lockyer in the state's "preliminary official statement" for the RAN sale.
The state actually wants to borrow $7 billion to be repaid by next June, but is opting for a smaller initial amount to ease the immediate cash crunch because of turmoil in the credit markets.
The document lists a projected revenue shortfall of $4.3 billion as the chief "cash pressure" and adds $300 million being demanded by the prison receiver and other smaller items. Federal Judge Thelton Henderson today told the state to be prepared to give the receiver $250 million very soon, following a hearing earlier in the week.
The cash crunch, the RANs and the prison demands were to be the chief topics for a meeting of Schwarzenegger and top legislative leaders today, possibly leading to a special legislative session to consider adjustments to the suddenly unbalanced budget.
The full RAN document is viewable here.
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