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Special election delay could lead to IOUs, treasurer's office says

March 23, 2011 |  5:23 pm

The state treasurer’s office is warning that pushing back resolution of the budget until November would leave California in a major cash crunch, potentially bringing a halt to construction of freeways and other public works.

Gov. Jerry Brown is said to be mulling over moving his election on taxes to November if he cannot reach a bipartisan compromise with state lawmakers for a June ballot. It is unclear whether Brown would sign a budget before November in such a scenario.

If no budget is in place, the state would be forced to delay the sale of bonds for public works projects, currently planned to resume in the fall, until next year, according to Tom Dresslar, a spokesman for the treasurer’s office. The state can’t go to market without a balanced budget in place, and the process of selling the bonds can take months.

“It would threaten the shutdown of hundreds of infrastructure projects,” Dresslar said.

He warned that the state could also find itself unable to access the multibillion-dollar loans in short term credit from Wall Street that it typically uses to keep cash in the treasury until the flood of tax receipts arrives in the spring. Failure to engage in such borrowing would leave the sate short of the cash it needs to pay its bills.

“You would be staring IOUs in the face,” Dresslar said.

-- Evan Halper in Sacramento