The Coming $25.4 Billion California
By Robert Wenzel
Economic Policy Journal
Link to site
Here's another reason Bernanke is printing. He needs to get cheap money into the economy so that it finds its way into the hands of states like California, who will otherwise be suffocated in debt.
California's Legislative Analyst's Office, California's nonpartisan fiscal and policy advisor, is out with their latest financial projections.
For the fiscal year 2010-11 (ended June 30), the office projects a deficit of $6.1 billion followed by a $19.3 billion deficit for the 2011-12 fiscal year.
The Office assumes that the state will be unable to secure around $3.5 billion of budgeted federal funding in 2010–11. The Office also projects higher–than–budgeted costs in prisons and several other programs. In addition, the forecast assumes that passage of Proposition 22 (a ban on state borrowing from local governments)will prevent the state from achieving about $800 million of budgeted revenue in 2010–11.
The Office projects annual budget problems of about $20 billion each year through 2015–16.
It won't take long to learn how bothered the markets are by this news. California is attempting to raise almost $14 billion in new debt over the next two weeks.
Treasurer Bill Lockyer has announced that he expects to sell $10 billion of RANs (Revenue Anticipation Notes) early next week in two series. One would mature in May 2011, the other in June 2011.
In addition to the RAN sales, Lockyer plans two long-term general-obligation bond offerings.
The state will sell $2 billion of taxable Build America Bonds on Nov. 18 followed by the sale of $1.75 billion of conventional tax-free bonds on Nov. 23.