The California Pooled Money Investment Board last week eased a freeze on lending for infrastructure projects across the state.
The PMIB invests $60 billion-plus of cash on behalf of local governments and state agencies via the California Pooled Money Investment Account. The account typically provides bond anticipation loans for infrastructure projects, which are paid back with interest when long-term bonds are issued.
But with the state budget in disarray and access to the municipal bond market limited, the investment account ran low on funds to lend last month, and the board decided to conserve the funds available to manage the California’s cash-flow crisis. Controller John Chiang, a member of the PMIB, estimates that the state’s available cash will be less than the amount of bills due next month.
California faces a two-year, $40 billion deficit that lawmakers have failed to fix since November. Republicans and Democrats cannot agree on what combination of tax hikes and spending cuts should be used to close the gap in the $103 billion a year general fund.
To save money for state operating needs, the PMIB cut off $3.8 billion of interim financing for capital projects at schools, hospitals, and other public facilities across the state on Dec. 17. It partially eased the loan moratorium by approving $650 million of loans for high-priority capital projects on Jan. 16.
“If the state can get back in the bond-selling business, we may be able to get more of the frozen infrastructure dollars flowing again,” Treasurer Bill Lockyer, also a member of the Pooled Money Investment Board, said in a statement.
He said the response to the sale of $350 million of Department of Water Resources power supply revenue bonds earlier this month suggested that institutional investors have returned to the California market and may be willing to let the state issue some long-term debt, despite the ongoing budget crisis.
“But there are no guarantees these efforts will succeed,” Lockyer said. “And even if they do, they won’t return our infrastructure program to its full capacity to generate jobs and economic prosperity.”
He said that won’t happen until state lawmakers balance their budget.