Standard & Poor’s this week said California may have trouble accessing the municipal market for its revenue anticipation notes without a balanced budget.

Gov. Jerry Brown’s proposed budget assumes that lawmakers and voters will approve extending some temporary tax increases this year to close the remaining deficit.

But if voters reject the tax extensions, the pathway to a balanced budget would be unclear, according to the Standard & Poor’s report.

The state issues revenue anticipation notes to have enough cash on hand to pay for operations because tax revenues come in later in the year while costs are front-loaded.

“A significant delay in the state’s ability to sell Rans could reintroduce strain on the state’s cash balances,” the report said.

The result would be that the state controller would take extreme cash-management actions, including possibly issuing IOUs.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.