SAN FRANCISCO — California will need to borrow $10.5 billion to meet its cash-flow needs for the rest of the fiscal year, starting with a $1.5 billion interim revenue anticipation note borrowing by Aug. 28, state finance officials announced this afternoon.

Because of the state’s budget crunch, since July 2 the State Controller’s Office has been issuing registered warrants, or IOUs, to creditors without legal or constitutional protection, to conserve cash for creditors who enjoy such protections, including bondholders.

Controller John Chiang said his office has now completed “stress tests” of the Department of Finance’s cash projections from the budget revisions lawmakers adopted in July to close the budget deficit.

State Treasurer Bill Lockyer said his office will issue $1.5 billion in short-term “interim” revenue anticipation notes by Aug. 28.

Lockyer said his office will sell $10.5 billion of Rans in mid-September, to pay off the interim Rans and meet the State’s cash flow needs through fiscal 2010.

Those notes would be redeemed before the fiscal year closes at the end of June 2010.

The September Ran sale will be promoted to individual retail investors, Lockyer said.

“This plan is a crucial step toward restoring some fiscal order to California,” Lockyer said in a statement. “Its successful implementation will rid us of the financial hardship and stigma caused by IOUs, and ensure the State has enough cash to provide crucial public services for the rest of the fiscal year.”

Chiang said the interim Ran sale later this month will give the state government enough resources to stop issuing IOUs, and redeem outstanding ones. Through Wednesday, the state had issued more than 327,000 IOUs for about $1.95 billion, said Chiang’s spokeswoman, Hallye Jordan.

The state’s Pooled Money Investment Board will hold an emergency meeting Aug. 21, at which it will be asked to approve a Sept. 4 redemption date for the IOUs, almost one month earlier than the October 2 maturity date printed on the IOUs.

“While we can finally put an end to this difficult, and frankly, shameful chapter in the State’s history, it does not bring an end to our fiscal challenges,” Chiang said in a statement.

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