ALAMEDA, Calif. — California Treasurer Bill Lockyer is preparing to take out a multibillion-dollar bridge loan from major banks once the nation’s most populous state adopts a budget.
“It’s a little premature to get into a lot of details,” Lockyer spokesman Joe DeAnda said Tuesday. “We’ve been in talks with a group of different banks about the possibility of arranging a very short-term loan.”
The state has been without a budget since July 1, the beginning of its fiscal year. California is now in the midst of its longest-ever such delay, though Gov. Arnold Schwarzenegger and legislative leaders announced a “framework” for a budget deal late last week. They have yet to fill in that framework publicly.
Schwarzenegger met with the top party leaders again on Monday and another meeting was planned for Tuesday afternoon, according to H.D. Palmer, a spokesman for the Department of Finance. He said plenty of staff work also is taking place behind the scenes.
“It’s fair to say they’re continuing to try to make progress,” Palmer said. “We hope that will lead to an agreement in the not-to-distant future.”
Once a budget is in place, California is expected to sell a multibillion-dollar revenue anticipation note deal. The short-term loan would help the state meet its cash flow needs during the time it takes to put together a Ran deal for the public markets, DeAnda said Tuesday.
That process will take three to five weeks after the state budget is in place. The bridge loan would help the state meet any interim cash needs.
“We’d be able to get access to the loan pretty quickly; most of the terms and everything will be pre-arranged,” DeAnda said.
Such a loan would be similar in structure to a $1.5 billion borrowing in 2009, in which the state placed interim Rans with JPMorgan in August, which were redeemed after the state sold $8.8 billion of notes into the public debt markets in September. The treasurer has already named JPMorgan senior manager of this fall’s public Ran sale.
At a New York conference Monday, Lockyer said his office was talking to JPMorgan, Bank of America Merrill Lynch, and Goldman, Sachs & Co. about a loan in the $5 billion range.
The final number could be less or more, DeAnda said.
“A lot of the factors that go into determining the details really can’t be determined until there is a budget,” he said.
That budget will be three months overdue as of Friday. Without a budget in place, many vendors aren’t getting paid and the state is deferring many payments to local agencies such as community college districts.
As of Tuesday, community college districts will see the third consecutive deferral of scheduled transfers from the state, according to Jack Scott, the state’s chancellor of community colleges.
“In the months since the state budget deadlock began, the California Community Colleges have been forced to survive by borrowing, freezing purchasing, delaying vendor payments, and other drastic steps,” Scott said Monday.
Tuesday’s $450 million deferral brings the total amount of state funding for community colleges that has been delayed to more than $840 million — or about 15% of annual funding, Scott said.