California Could Lack Funds To Cover Spending by February
Absent approval of a budget plan by the Legislature and Gov. Arnold Schwarzenegger (R), California will not have sufficient funds to cover state expenditures in February, setting the stage for Controller John Chiang (D) to issue IOUs in lieu of some payments, according to a report that state Legislative Analyst Mac Taylor released on Wednesday, Capitol Weekly reports.
To some extent, state law determines which programs must be prioritized for state funding, according to Capitol Weekly (York, Capitol Weekly, 1/15).
The report states that funding for schools and creditors is the first priority, while Medi-Cal claims, workers' salaries and benefits, and court-ordered payments are secondary priorities.
Medi-Cal is California's Medicaid program (Yamamura, Sacramento Bee, 1/15).
The report said that without action by lawmakers the state will be $500 million short of cash to pay bills by Feb. 1 and that the shortfall will increase to $4 billion by March.
The state's budget deficit is projected to reach $41.5 billion over the next 18 months (Buchanan, San Francisco Chronicle, 1/15).
Delaying Payments, IOUs
The report states, "In the weeks before the state cash on hand reaches zero, the State Controller ... must delay payments classified as lower-priority."
Such delays could affect:
- Tax refunds;
- Student aid checks; and
- Payments to local governments and vendors (Capitol Weekly, 1/15).
According to the Chronicle, delaying payments or issuing IOUs likely would hamper the state's prospects for selling bonds (San Francisco Chronicle, 1/15).
The report indicates that the cash shortfall will continue through the end of fiscal year 2008-2009 on June 30 if a budget plan is not approved (Herdt, Ventura County Star, 1/15).
In a meeting with the Chronicle editorial board Wednesday, Chiang said he agreed with Taylor's forecast, adding that without legislative action, the state's budget gap would increase by $6 billion at the end of the fiscal year.Chiang said, "If we're walking into the next fiscal year $4 billion in debt and you add another $6 billion on top of that, unless people are willing to work for free, cuts are going to have to be made" (San Francisco Chronicle, 1/15). This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.