SAN FRANCISCO — California Gov. Jerry Brown’s quick veto of the budget adopted by the Legislature last week has renewed concerns about the state’s cash flow amid another long delay.
Without an enacted balanced budget, the state cannot go forward with its annual multibillion-dollar revenue anticipation note sale over the summer that is used to shore up cash to pay for operations.
Standard & Poor’s analyst Gabriel Petek said in a report Friday that it’s unclear how long the state’s cash collection will allow it make its payments without the Ran sale. California sells notes to help pay for operations in the front end of the fiscal year because tax revenues are stronger in the second half.
“The threat of a protracted budget negotiations extending into the new fiscal year could, therefore, undermine the state’s liquidity and continue to exert downward pressure on the state’s credit rating,” Petek said.
The ratings agency said the veto does not impact California’s A-minus rating.
Without a shot of liquidity from the Ran sale, California Controller John Chiang may be forced to take special cash-management measures. During 2009’s long budget delay, Chiang issued IOUs to fund operations.
However, Petek noted that the state’s revenue forecasts, as of the governor’s proposed May revised budget, were $2.8 billion above Brown’s original budget projections.
Chiang recently said tax revenue collections in May were 5.9%, or $408 million, above Brown’s revised estimates.
Chiang spokesman Jacob Roper said the controller will release new cash projections this week.
“Hopefully that will show where any cash pitfalls are in the current calendar year,” Roper said in an e-mail Friday.
California Treasurer Bill Lockyer spokesman Tom Dresslar reaffirmed Friday that the state will be unable to go ahead with this summer’s note sale without a balanced budget.
Dresslar said the state government has no plans to sell general obligation bonds until the fall. Lockyer has said he will not sell bonds unless the state has a balanced budget that has the confidence of the market.
Standard & Poor’s said it was unclear whether the Legislature’s adopted budget would have solved the cash-flow problems.
On Wednesday, California lawmakers passed a fiscal 2012 budget, beating a midnight deadline to adopt it or face the loss of their pay. Less than 24 hours later, Brown vetoed the spending plan, citing its billions in borrowing and legal maneuvers used to close a $9.6 billion hole.
The budget sent to the governor closed the gap using mainly one-time fixes and was passed by a simple majority, supported by the majority Democrats.
Brown has been unable to get enough minority Republicans on board to attain the two-thirds threshold needed to approve an election that would ask voters to approve extending temporary taxes, a linchpin of his budget proposal.
The governor’s veto caught lawmakers by surprise.
Senate President Pro Tem Darrell Steinberg, D-Sacramento, and Assembly Speaker John Perez, D-Los Angeles, said in a statement Friday they were “deeply dismayed” by the veto.
“The budget plan approved by the Legislature closely mirrored the governor’s framework of a mixture of cuts and revenue solutions,” the statement said.
The budget sent to Brown and subsequently vetoed included two redevelopment agency bills, which would have restructured local RDAs and require them to give up revenue to the state.
It also relied mainly on spending cuts and higher levies, including raising vehicle registration fees and local sales tax rates, a sale-leaseback of state buildings, and forcing online retailers to collect sales tax.
California’s fiscal year ends on June 30. Last year, the budget was 100 days late.
Lawmakers had been under pressure to pass a balanced budget before June 15, the deadline set in the state’s constitution. A ballot measure voters approved in 2010 docks lawmakers’ pay for the length of any delay after that date.
Chiang had said he would withhold legislators’ salaries if they failed to pass a balanced budget by midnight.
Roper said the controller will release an analysis early this week of whether lawmakers should lose pay because of the governor’s veto.
California GO bonds carry ratings of A1 from Moody’s Investors Service and A-minus from Standard & Poor’s and Fitch Ratings.
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