SACRAMENTO — With credit markets all but paralyzed and state and local governments unable to borrow money, California officials joined calls Thursday for quick approval of a financial bailout plan working its way through Congress.
The warnings were stark, including suggestions that operating funds to pay state workers, teachers or even healthcare workers could dry up in the weeks ahead.
"It is daunting that California, the eighth-largest economy in the world, cannot obtain financing in the normal course of its business to bridge our annual lag between expenditures and revenues," Gov. Arnold Schwarzenegger wrote in a letter to the state's congressional delegation in Washington.
California is swiftly running out of time to float $7 billion worth of short-term debt needed to pay workers and bills as early as next month, state Treasurer Bill Lockyer warned in his own letter.
"This isn't just a gridlock in Washington problem or a Wall Street financial problem, there are real-life impacts on local school districts, on providing healthcare for the aged and on and on," he said.
The threat of a prolonged cash crunch has leaders of the main state workers union alarmed, said Jim Zamora, a spokesman for the Service Employees International Union Local 1000, which represents 95,000 people. "We hope it does not come to the point where it threatens members' jobs," he said.
The borrowing is needed to keep the state's cash flowing between last week's signing of an 85-day-late state budget and the arrival next spring of the bulk of proceeds from the state income tax.
California usually has little trouble getting a competitive interest rate on its short-term borrowing. The securities, known as Revenue Anticipation Notes, are tax-free for investors and backed by the full faith and credit of the state.
But this year the process is expected to be much tougher, said Controller John Chiang. Getting the full $7 billion -- enough to meet all obligations through June 30, 2009 -- will be challenging, especially given the short window of time between now and the final days of October, when California is estimated to run out of cash, Chiang said.
In the meantime, local governments, school districts and public agencies are shying away from selling bonds because of a lack of buyers or demands that they pay extremely high interest rates.
Among the would-be borrowers are school districts in Irvine, Fort Bragg on California's North Coast and Bridgeport in the eastern Sierra Nevada foothills.
