California State Treasurer Phil Angelides briefed reporters in August on the state's plans for issuing the $18 billion in debt that is necessary to balance the recently adopted fiscal 2004 budget. In outlining his plans, Angelides admitted that completing the transactions will be a "formidable task" and that borrowing is not a prudent way to fund operating expenses.
"I have strongly advocated for--and would have preferred--a budget that truly balanced revenues and expenditures, rather than one that postpones the day of reckoning," he said. "My office will do its best to complete these transactions in the most cost-efficient manner possible."
For the 10th time in the last 11 years, California will issue revenue anticipation notes to cover its cash flow needs. The state expects to issue $3 billion in RANs, which are to be repaid out of the general fund by June 2004.
Of the $15 billion in long-term debt to be issued by the state, the largest is the $11 billion in "fiscal recovery bonds." Expected to be sold in two separate installments beginning in February 2004, these bonds will be used to help close an unprecedented general fund deficit. The bonds are backed by a half-cent state sales tax and will mature in five to seven years.
"The very fact that the state must go to the market to borrow $18 billion to balance the budget should...