SAN FRANCISCO - California Gov. Arnold Schwarzenegger -- in a move designed to tighten the noose around lawmakers resisting his proposals for major budget cuts to balance the state's budget -- announced Thursday afternoon that he was withdrawing the authority that would be needed for the state to issue revenue anticipation warrants to meet the state's cash-flow requirements.
The warrants, usually called RAWs, are a vehicle that permits the state to borrow money for cash-management purposes during one fiscal year and repay them in another.
Schwarzenegger Thursday revoked an authorization he had granted in 2008 to transfer money from special funds and various state accounts to the state's General Cash Revolving Fund.
"I have informed legislative leaders that under no circumstances will I agree to issue a RAW to paper over our current budget shortfall," Schwarzenegger wrote in a letter to State Controller John Chiang, whose office would issue a RAW. "This revocation ends any chance that the state could issue a RAW," Schwarzenegger wrote.
Earlier this week, Chiang had warned that the state's cash position deteriorated even faster than expected during May and that the state would have a negative cash balance approaching $3 billion by the end of July unless lawmakers took quick action to bring the state's budget into balance.
Schwarzenegger, a Republican, has proposed a $24 billion budget-balancing package that includes billion of dollars in cuts to education and social service programs, cuts that have given pause to many members of the Democratic majorities in the Legislature.
The state is still highly likely to need to make a short-term borrowing for cash-flow purposes, which would have to take the form of a revenue anticipation note, a security issued by the State Treasurer's Office that must be repaid in the same fiscal year it is issued.
Treasurer Bill Lockyer has warned that a successful RAN sale would require a budget that is plausibly balanced to convince investors that the state will be able to redeem the notes when they are due.
