State Controller John Chiang warned Gov. Arnold Schwarzenegger and legislators today that the state could run out of cash to pay its bills before the end of the fiscal year and urged them to make $2.7 billion in "cash solutions" to avoid delays in payments.
Chiang didn't mention registered warrants, otherwise known as IOUs, which the state used to pay vendors last year when it hit a severe cash crunch. But his warning undercuts previous assurances from the governor and other officials that the state could make it through the current fiscal year, which ends June 30, without another cash crisis.
A big test will come late in the period, when the state must repay billions of dollars in short-term loans called "revenue anticipation notes," that it floated last year. It cannot issue new RANs until it has a 2010-11 budget in place.
"My analysis of the governor's recently released revenue and expenditure estimates shows that the state's cash position for the remainder of the current fiscal year will be weak from approximately March 30 through April 21," Chiang said in a letter to his fellow officials.
"According to my projections," Chiang continued, "California will drop below its $2.5 billion prudent minimum cash balance on March 30 by $1.3 billion. On April 1, the state will be in the red by $197 million, and our resources to pay bills are not expected to return to safe levels until April 21.
"Barring any unforeseen circumstances, such as a spike in expenditures or precipitous decline in revenues, $2.7 billion in cash solutions are necessary to avoid a cash shortage in the current fiscal year."
Chiang's letter is available here, and his cash flow chart may be found here.
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