SAN FRANCISCO — California is preparing another multibillion-dollar general obligation bond sale next week with a backdrop of both bad news and good news.
The bad news comes on the political front, from the special session Gov. Arnold Schwarzenegger called to deal with the state budget deficit, which has sputtered to an end without making much of a difference.
The good news comes on the financial front, from taxpayers, who for a several months have paid more taxes than expected, according to separate tallies kept by the state controller’s office and the governor’s Department of Finance.
California is poised to sell about $2 billion of taxable bonds next week — $1.325 billion of Build America Bonds, which provide the state with a 35% federal interest subsidy in lieu of tax exemption, and $675 million of true taxable bonds. All figures are tentative, according to Tom Dresslar, spokesman for Treasurer Bill Lockyer.
The deal is scheduled to price Thursday after a retail order period Wednesday. Final structures are still to be determined.
One maturity, as yet undetermined, will be offered to retail on a priority basis, and retail orders will be taken on all maturities, Dresslar said. Demand remains uncertain.
“We hear noise periodically that retail buyers are interested in BABs and taxable bonds,” he said. “But it never seems to materialize.”
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According to the monthly cash report the Department of Finance released Tuesday, general fund agency cash for February was $219 million ahead of projections in the governor’s January budget proposal, with year-to-date revenue about $1.99 billion ahead of forecast.
The controller’s monthly report, released last week, said year-to-date receipts were $1.94 billion ahead of forecast.
Both departments have reported better-than-expected numbers for three months running. It is a small dent in what is projected as a $19.9 billion general fund gap through June 2011.
The state’s recent upbeat financial reports may have defused some of the urgency from the budget special session, convened in January when Schwarzenegger declared a fiscal emergency.
Lawmakers adjourned the special session last week. Schwarzenegger said Tuesday that he would veto a bill that exchanges California’s sales tax on gasoline for an excise tax in a manner that would generate $1.1 billion for the state general fund.
While the idea originated with the governor, Schwarzenegger, in an open letter Monday to legislative leaders, said he objected to changes made by Democrats to preserve funding for public transit.
“I cannot sign this flawed legislation as written,” he wrote.
Earlier, Schwarzenegger vetoed a bill promising $2.1 billion in deficit reduction, saying the savings were an illusion because they only stated intent to cut spending, rather than specifying the cuts.
Schwarzenegger estimated the special session generated about $200 million in deficit reduction among the bills he was willing to sign.
Senate President Darrell Steinberg, D-Sacramento, responded with his own open letter to the governor, blaming Schwarzenegger’s vetoes for the relatively ineffective results of the special session.
“In short, it is your actions that threaten to reduce the value of the Legislature’s budget solutions from more than $4 billion to only $200 million,” Steinberg wrote.
The budget debate now moves into the process of the Legislature’s ongoing regular session.
Committees are meeting to debate the points of the governor’s January budget proposal, but the pace is not expected to pick up until Schwarzenegger issues his May revise budget proposal after April’s income tax returns come in.