by David M. Greenwald
California Progress Report
The Legislative Analyst Office (LAO) update came out Thursday morning with their May 2009 update and the news for California is bad. The bottom line is that the state is facing a cash flow problem somewhere around $17 billion by July 1. That number increases to $23 billion if the propositions fail.
In their summary, the LAO writes:
“The General Fund’s “cash cushion”—the monies available to pay state bills at any given time—currently is projected to end 2008–09 at a much lower level than normal. Without additional legislative measures to address the state’s fiscal difficulties or unprecedented amounts of borrowing from the short–term credit markets, the state will not be able to pay many of its bills on time for much of its 2009–10 fiscal year. Deterioration of the state’s economic and revenue picture (such as the $8 billion revenue shortfall we forecasted in March) or failure of measures in the May 19 special election would increase the state’s cash flow pressures substantially—potentially increasing the short–term borrowing requirement to well over $20 billion. California is likely to have difficulty borrowing anywhere close to the needed amounts from the short–term bond markets based on the state government’s own credit.”
This cash flow crisis calls for immediate and prompt legislative action.