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Lockyer Urges Passage of Cash-Flow Bill

SAN FRANCISCO – California State Treasurer Bill Lockyer asked an Assembly committee Wednesday to approve a cash-management bill designed to make state general obligation bonds more palatable to investors.

The State Treasurer’s Office pulled a planned $2 billion GO bond sale off next week’s calendar after the cash-flow management bill stalled in the Assembly this week following its passage in the state Senate.

That legislation gives state budget and finance officials additional authority to manage the timing of payments for various state programs through the end of fiscal 2011.

After hearing from a parade of education lobbyists concerned about the way the deferral plan would affect schools and community colleges, committee members voted to move the bill to the Assembly floor, after committee chair Noreen Evans, D-Santa Rosa, promised clean-up legislation to help mitigate those effects.

The cash-flow bill was structured to give ratings agencies and investors confidence that the state government can manage its cash flow while avoiding a repeat of last year, when it had to pay many creditors with IOUs.

Lockyer testified before the Assembly Budget Committee, saying the cash-flow bill is needed to keep the state’s GO bond sale program moving.

Lockyer told the committee that bond funded construction projects could dry up by the summer if the state doesn’t get market access.

His office has a limited window to act before the release of the governor’s May revise budget proposal, which creates an issuance blackout for the treasurer’s office because of disclosure concerns.

“We’ve got until maybe mid-April to try and get to the market three or four times,” Lockyer said.

The education lobbyists told committee members that the bill, designed to ease the state’s cash-flow concerns, effectively pass the problems down to school districts and community colleges.

“We are opposed to deferrals,” California School Boards Association lobbyist Debra Brown said. “It is passing the state’s cash flow projects to districts. The costs are not insignificant to districts.”

By creating uncertainty about when community colleges would receive payments from the state government, the cash-flow bill will make it harder for them to get market access for tax and revenue anticipation notes, said Erik Skinner, vice chancellor for finance in the California Community Colleges Chancellor’s office. Provisions to defer payments to community colleges next month would threaten their ability to manage outstanding TRAN issues, Skinner said.

Jason Sisney of the Legislative Analyst’s Office told lawmakers that any budget solution that emerges from the Legislature is likely to include significant cash deferrals for schools.

“Enacting them now as opposed to later gives school districts the opportunity to plan,” he said.

Meanwhile Wednesday afternoon, Moody’s Investors Service affirmed its Baa1 rating and stable outlook for California GO bonds.

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