SAN FRANCISCO — Despite California Gov. Arnold Schwarzenegger’s announcement late Thursday that he has withdrawn the authority that would be needed to issue revenue anticipation warrants, the state treasurer is prepared to move forward with a sale of revenue anticipation notes, according to a spokesman.
Schwarzenegger said his action, designed to encourage state lawmakers to take quick action on his budget-cutting proposals, has eliminated the state government’s ability to issue Raws, which are cash-flow notes that run beyond the course of a single fiscal year.
With the state government’s revenue base continuing to shrink, the Republican governor proposed $24 billion in budget adjustments, primarily in the form of program cuts.
Those cuts have run into resistance from the Democratic majorities in the Legislature, where lawmakers have taken aim at the governor’s proposal to leave a $4.5 billion reserve in his proposed $489 billion fiscal 2010 budget.
The governor’s authority is not needed to issue Rans, which are issued and redeemed within the course of a single fiscal year, said Tom Dresslar, spokesman for Treasurer Bill Lockyer. The 2010 fiscal year begins July 1.
“The process on that is the controller determines the amount we need and treasurer goes out and does it,” Dresslar said.
For a Ran sale to be successful, however, it will require quick adoption of a budget that will be credible to investors, according to Dresslar.
“We think if we get a credible budget solution by the end of June that gets the cash-flow borrowing need to $7 billion to $9 billion, we will be able to meet our cash flow needs with a Ran,” he said.
Lockyer, a Democrat, is in agreement with the Republican governor on the need to maintain a reserve, particularly in light of the ongoing deterioration of the state’s tax revenues.
“For that solution to be credible, it needs to have a reserve in the amount the governor has proposed,” Dresslar said.
Earlier this week, state Controller John Chiang warned that California’s cash position deteriorated even faster than expected during May and that the state will have a negative cash balance approaching $3 billion by the end of July unless lawmakers take quick action to bring the budget into balance.
The governor could authorize Raws again should there be a budget deal to his satisfaction, and the State Controller’s Office remains prepared to move forward should that happen and Raws are needed to meet all or part of the state’s short-term cash requirements, said spokeswoman Hallye Jordan."We all prefer the Rans; everyone does," Jordan said. "We're still talking with Wall Street, keeping those lines of communication open."
