Don't Panic
By David Walrath
Yesterday, State Treasurer Bill Lockyer indicated the state’s cash flow problems could result in a delay or termination of funding new infrastructure projects. The Treasurer indicated that such a slowdown or stoppage could occur within ten days. The Treasurer made these comments to a joint session of the Legislature. At the same joint session, the Controller indicated the state would be running out of cash they could borrow by the end of February or the first part of March.
The comments by the Controller, Treasurer, Department of Finance and the Legislative Analyst’s Office all underscored the state’s cash flow budgetary problems.
Don’t Panic
We expect that the State Allocation Board (SAB) will continue to apportion funds for projects. In the past, the state has apportioned funds even when there were no state matching funds available. The Controller’s and Treasurer’s comments will have a greater effect on fund releases than it will on apportionments. However, it is possible, if the state does not find new internal borrowing or external borrowing, the Controller will restrict school facility fund releases by February. This is a serious situation where school districts need to understand the potential lack of state funds for their projects. School districts may need to look at their own internal capital facility resources, or external borrowing through apportionment anticipation notes or bonds as a means of moving their projects forward if the state is unable to meet fund releases.
While there are significant available school bonds that have been approved by the voters but are not yet sold, it appears the Treasurer is not anticipating the sale of such bonds in order to meet school facility infrastructure state match obligations.
This is a very fluid situation we will continue to work on and will be discussing this situation with the SAB tomorrow.
