ALAMEDA, Calif. — The California treasurer’s office is firming up details for a temporary cash-flow loan it expects to close next week, allowing the state to resume paying tax refunds and catch up on payments due to local agencies.
Treasurer Bill Lockyer is in the process of finalizing an interim loan of between $6 billion and $7.5 billion, spokesman Joe DeAnda said Monday.
“We should know more by midweek,” he said.
The state sells short-term notes almost every year to deal with built-in irregularities in its cash flow. A disproportionate share of state tax revenue arrives in the springtime, near the end of the fiscal year.
This year’s budget, signed Oct. 8, was 100 days late, a dubious record for a state with a history of tardy budgets, and the delay kept California out of the market.
California is going to Wall Street for an interim loan to deal with its immediate cash crunch, while working on the documentation necessary to go to the public markets to sell about $10 billion in revenue anticipation notes.
The interim loan will be paid off with the proceeds of the public Ran deal, which is expected to price the week of Nov. 15, DeAnda said.
JPMorgan will be the lead manager for a team of 37 broker-dealers selling the notes.
First in line to benefit from the state’s cash infusion will be taxpayers awaiting $529 million in refunds, said Garin Casaleggio, spokesman for Controller John Chiang.
Proceeds of the interim loan will also be used to make other scheduled payments California delayed because of the budget crisis.
When the budget was finally passed, lawmakers also passed a bill authorizing the controller to hold off on those scheduled payments.
Once the state has cash in hand, it can make almost $3 billion in scheduled but overdue payments to K-12 school districts, $537 million in payments to community college districts, and more than $320 million in financial aid grants to students in the state university systems.
In all, the controller’s office reports holding off on more than $5.3 billion in payments due during October because of the budget delay.
After the public Ran sale, the treasurer’s office would like to sell long-term general obligation bonds, though time is short because California will enter a disclosure-related bond-issuance blackout toward the end of November, when finance officials begin assembling the new governor’s January budget proposal.
“It just depends on getting these first two [Ran] pieces done and looking at the market then,” DeAnda said.
Budget projections put together earlier this year by the state Department of Finance call for California to issue more than $6 billion of GO bonds this fall to keep funds flowing to ongoing public works projects.
As of Monday, the bond sale calendar posted by the treasurer’s office said it’s planning a sale of taxable GO Build America Bonds the week of Nov. 15, with a tax-exempt GO bond issue the week of Nov. 22, — the week of Thanksgiving. The holiday period is usually a slow week in the municipal market.
No par amount was listed for either proposed bond sale.