California scrambles to pay its bills with more borrowing
Controller John Chiang, who manages the state's cash flow, finished July with more than $18 billion in outstanding loans after using high-speed accounting to cover day-to-day expenses. That means he would borrow some money from the state's 500-plus "special" funds, used it to pay a bill and promised to repay it later when more tax revenue rolls in.
It's a standard maneuver, especially at the beginning of the fiscal year, when expenses outpace revenues. But the controller leaned more heavily than usual on this tactic last month, tapping 81% of the money available for short-term borrowing, up from 48.4% in July 2011.
A spokesman for the controller, Jacob Roper, had a matter-of-fact explanation for the borrowing: “That’s the amount of special fund borrowing necessary to carry out the state’s budget.”
The $18 billion in outstanding loans includes $9.6 billion left over from June, as well as $8.5 billion in new borrowing in July.
H.D. Palmer, a spokesman for Gov. Jerry Brown's Department of Finance, said the state has needed more short-term borrowing because it won't get the extra revenue it needs until voters approve higher taxes in November. Brown is asking voters to increase the sales tax by a quarter cent and boost levies on the wealthy by one to three percentage points.
The controller's short-term borrowing is separate from the loans taken out by the governor and lawmakers, which have also increased. There's $4.3 billion in outstanding loans from special funds, a nearly six-fold increase since 2008.
-- Chris Megerian in Sacramento
Photo: Gov. Jerry Brown, left, and Controller John Chiang and in 2011. Credit: Brian van der Brug / Los Angeles Times