SAN FRANCISCO - California Gov. Arnold Schwarzenegger’s
Schwarzenegger, responding to continuing slides in state revenue since lawmakers adopted a fiscal 2010 budget in February, released two versions of his revised budget proposal - one to address a $15.4 billion shortfall, and another to address a $21.3 billion shortfall if voters reject several budget-related ballot measures Tuesday, particularly a measure that would allow the state to sell $5 billion of bonds backed by the state lottery.
The ballot measures have fared poorly in public opinion polls.
Either scenario includes $6 billion of Raws, a short-term instrument that allows the state to borrow in one fiscal year and repay in the next, as opposed to revenue anticipation notes, which are contained within a single year.
The warrants will be needed early in fiscal 2010, which commences July 1, and would be retired toward the end of fiscal 2011, Schwarzenegger finance spokesman H.D. Palmer said Friday. The timeline requires prompt action by lawmakers, he said.
"We have a very narrow window to get a lot of difficult, necessary decisions resolved," Palmer said.
The $6 billion is just a start - California's total projected short-term borrowing needs have been estimated at anywhere from $13 billion to $23 billion.
Schwarzenegger's finance department will work with the state treasurer's office and state controller's office to determine the full extent of the state's borrowing needs and the strategy for addressing it, Palmer said.
Palmer added that Schwarzenegger supports Treasurer Bill Lockyer's efforts, formalized last week in a letter to U.S. Treasury Secretary Timothy Geithner, to ask the federal government to use Troubled Asset Relief Program funds to back state and local cash-flow borrowing.
"This is an issue that isn't just Sacramento," Palmer said. "Local governments, and other states, are likely to be in similar situations."
The U.S. Treasury press office did not return calls for comment Thursday and Friday.
Schwarzenegger's budget proposal would create fiscal stress for many California local governments if Tuesday's budget ballot measures are defeated.
If they are defeated, the governor plans to ask lawmakers to borrow $2 billion from local governments by taking 8% of their property tax revenues.
Under the state constitution, they would have to be repaid within three years.
The enabling legislation for the borrowing would also create a joint-powers authority to allow local agencies to borrow against the state repayment as a group, according to administration budget documents.
Lockyer said time is of the essence for lawmakers and the governor to agree on a budget solution.
"Another prolonged, embarrassing political stalemate would further damage California's credit reputation, hurt our ability to sell bonds, notes, or warrants, and inflict unnecessary harm on taxpayers and crucial public services," he said in a news release.
Schwarzenegger garnered headlines last week by proposing the state raise money by selling several high-profile assets, including the Los Angeles Coliseum football stadium, and the San Quentin Prison, which sits on land with a striking view of San Francisco Bay.
But Palmer acknowledged that such sales would not bring the state revenue during the next budget year.
"You can't simply turn over title and quit claim deed to San Quentin," he said.
The governor's new budget plan proposes another asset sale: it projects raising $1 billion from selling part of the book of business of the state compensation insurance fund, the state-owned provider of workers' compensation insurance, to a private entity.
