On Tuesday California Controller John Chiang sent a letter to budget leaders in the state Legislature urging them to take action before the state runs out of cash in March.
In the letter to Sen. Mark Leno Assemblyman Bob Blumenfield, the controller said the liquidity shortfall is projected to last between Feb. 29 and about April 13.
Cash flows based on the governor’s proposed budget show that $3.3 billion worth of cash solutions are needed to address liquidity needs during this period.
If left unaddressed, the State's General Fund balance at this time will fall below the $2.5 billion minimum safety cushion on Feb. 29, Chiang’s office reported.
On March 1, cash will be exhausted and will continue to decline until hitting a low of negative $730 million on March 8, according to Chiang.
Working with the state treasurer and the Department of Finance, the controller has crafted a cash management plan that would avoid delays in paying tax refunds or issuing IOUs, as was required in 2009.
Additional measures may be needed should the state’s fiscal condition worsen, Chiang said.
“Although this cash management plan relies on still more borrowing, payment delays and deferrals, we believe this is the most prudent and responsible course of action considering we have about four weeks before the advent of the cash shortfall,” Chiang wrote. “It is not an ideal solution, but it is the best way to manage the challenge without relying on IOUs or delaying tax refunds – actions that can disrupt the delivery of essential public services and slow California’s economic recovery.”
Chiang also reported that as of Dec. 31, total state receipts are coming in $2.6 billion less than forecasted, with expenditure $2.6 billion more than assumed, totaling a $5.2 billion shortfall in cash resources.
See the full letter below.
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