SAN FRANCISCO — California Controller John Chiang delivered a rare piece of good news this week in his monthly general fund cash report, saying the state beat its budget estimates for October.
General fund receipts were $285 million ahead of estimates in the most recent amended budget.
“October’s receipts are a welcome break from a largely negative trend line for the last two years,” Chiang said in a statement Tuesday. “However, high unemployment, excessive borrowing, an ailing construction industry, and legal challenges to the budget remain real threats to the state’s cash outlook.”
Despite the stronger-than-expected performance in October, California revenues remained $854 million below projections for the entire budget year, which started July 1.
Gov. Arnold Schwarzenegger added his own gloomy outlook to the budget picture this week as well.
“It looks like we could have anywhere between a $5 billion and $7 billion shortfall this fiscal year,” the governor said during a webcast interview Monday with the Fresno Bee editorial board.
Aside from revenue weakness, the budget includes assumptions that few people believe will be realized, such as $1 billion for the sale of a portion of the state workers’ compensation insurers’ book of business. An adverse California Supreme Court decision in October in a case challenging the diversion of public transportation funding is expected to cost at least another $1 billion.
The only solutions Schwarzenegger discussed Monday were cuts, though he admitted it would be tough going.
“The low-hanging fruit and medium-hanging fruit are all gone,” he said. “We are on the high-hanging fruit.”
The state’s budget issues were partly demonstrated Tuesday, when the California Statewide Community Development Authority priced a $1.895 billion deal to securitize the state’s promise to repay money it is borrowing from local governments to help balance this year’s budget. The deal carried the state’s bond ratings — BBB from Fitch Ratings, Baa1 from Moody’s Investors Service, and A from Standard & Poor’s.
All the bonds mature in 2013, and that heavy supply of a single maturity pushed the yield to 4%. Goldman, Sachs & Co. was the underwriter.
In all, 1,257 agencies participated in the transaction, in which the state will bear all the interest and issuance costs, said James Hamill, program manager with the CSCDA. That includes 408 of the state’s 478 cities and 57 of its 58 counties.
Schwarzenegger visited the Fresno newspaper as part of a victory tour around the state following passage of a water infrastructure package that was years in the making.
Earlier that day, in a ceremony at a dam near Fresno, he signed the $11.2 billion water bond measure component of the package. Voters will have to approve that next November.
The governor rejected the idea that it was a bad time to move forward with a bond measure because of the state’s bad economy.
“You don’t want to punish the future because you have an economic crisis today,” Schwarzenegger said.