SAN FRANCISCO — California's cash flow has improved enough to allow to the state to reduce the amount of money it had planned to hold back from schools, local governments and other programs.

The state will release $1.8 billion of the backed payments one month ahead of schedule in December, and it will forgo more than $900 million of the so-called cash deferrals previously set for March, California finance officials said in a statement Friday.

"This relief from payment deferrals reflects a recovering economy and sustained, commendable fiscal discipline by the Governor and Legislature," Treasurer Bill Lockyer said in the statement. "The bond market has taken notice, and taxpayers will reap the benefits."

The state will be able to speed up and reduce the payment deferrals because of "a sound budget, diligent debt management, and the passage of Proposition 30," Department of Finance Director Ana Matosantos said in the same release.

The elimination of the March deferrals also means that school districts may not have to borrow money in the second half of the year to compensate for the state's delayed payments, finance department spokesman H.D. Palmer said in an interview.

Cash-flow problems in recent years have led California to try to find ways to shore up its cash position until revenue comes in later in the year during income tax season.

Those tools helped the state mitigate a cash-flow shortfall earlier this year when Lockyer had to sell $1 billion of privately placed debt in February as part of a plan to raise cash after Controller John Chiang warned that California would run out cash unless it adopted $3.3 billion of short-term measures.

California also usually sells billions of dollars of revenue anticipation notes to investors every year to help bridge the gap in tax collections. The state issued $10 billion of Rans, tied with its largest sale ever, in August.

Palmer said it is too early to tell whether improving cash flow would reduce the amount of Rans the state sells next year.

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