Treasurer Secures $5B in Loans To Avoid Federal Debt Crisis Effects
State Treasurer Bill Lockyer (D) has secured $5.4 billion in private loans in case the federal government fails to raise the debt ceiling and cannot meet its budgetary obligations, including funding Medicare and Medi-Cal, California's Medicaid program, the AP/Sacramento Bee reports.
On Aug. 2, the federal government will exhaust its ability to borrow and meet all its spending obligations. If lawmakers fail to reach agreement on negotiations over the debt ceiling, the government could halt payments to states for programs that include health and human services in an effort to avoid a default (Lin, AP/Sacramento Bee, 7/26).
Lockyer hadÂ planned to sell at least $5 billion in "revenue anticipation notes" to investors in August.
California usually sells short-term notes this time of year to cover operating expenses before the arrival of tax revenue later in the fiscal year, but Lockyer decided to raise the cash sooner (Petruno, Los Angeles Times, 7/26).
The loan has a 0.237% interest rate.
The state will receive:
- $1.47 billion from Goldman Sachs;
- $1.47 billion from Wells Fargo;
- $736 million from Citigroup;
- $491 million from Barclays Capital;
- $491 million from JPMorgan Chase;
- $245 million from Bank of America Merrill Lynch;
- $245 million from Morgan Stanley; and
- $245 million from U.S. Bancorp (De la Merced, "DealBook," New York Times, 7/26).
The loan matures Nov. 22, but it can be repaid before then (Los Angeles Times, 7/26).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.