Capitol Alert
The latest on California politics and government
September 29, 2010

Add a multibillion-dollar state bond sale and thousands of construction projects to the list of potential victims if the budget impasse drags on much longer.

State Treasurer Bill Lockyer is concerned that the state could miss an opportunity to sell bonds this fall to finance public works projects if state lawmakers and Gov. Arnold Schwarzenegger don’t enact a budget soon.

“The treasurer said the first week of October is a critical week,” said Lockyer spokesman Joe DeAnda. “Beyond that, it really puts a cramp on the amount of time that’s left to put that deal together.”

The problem is, the state can’t sell bonds for infrastructure until it has resolved its cash needs to pay for general state services. To do that, the state needs to obtain short-term loans, known as Revenue Anticipation Notes, which require a budget to be in place.

It will take the state three to five weeks to obtain RANs and then another three to five weeks to put together the bond deal, DeAnda said.

The problem? The state treasurer has to complete the infrastructure bond sale by Thanksgiving. At that point, the state enters a “blackout” period until the next governor issues a budget proposal in January. During that time, the state can’t go to market because the Department of Finance will be compiling projections and proposals for the next budget year — information the treasurer would be required to disclose to investors.

DeAnda said it is not yet known how much the state needs to sell this time. The treasurer completed a $4.1 billion sale last October. Absent a bond sale this fall, the state would run the risk of freezing thousands of construction projects like it did in late 2008 and early 2009 after the state was unable to complete a fall bond sale.

“It is crucial,” DeAnda said. “If we can’t get that done, it’s highly likely you’ll see the same situation come back.”

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