In the absence of a state budget, the state's three fiscal leaders announced today they plan to defer payments to schools and counties one month earlier than planned to bolster the state's cash situation.
Jacob Roper, spokesman for Controller John Chiang, said the move does not change Chiang's assessment last Wednesday that he may have to rely on IOUs to pay bills within "two to four weeks." Chiang signed the deferral letter along with Treasurer Bill Lockyer and Finance Director Ana J. Matosantos.
Under the move, the state will defer $2.5 billion in payments owed to K-12 schools and $400 million owed to counties for welfare-to-work in late September.
Department of Finance officials described the impact as essentially delaying payment until spring of an existing deferral already in place.
The state previously deferred a similar amount of payments in July and was supposed to repay those in September. To cover that period, school districts took out bridge loans meant to last until September. But under the latest deferral, districts will have to rely on those loans until spring.
"The lack of a state budget is levying additional fiscal stress on schools and counties, and unfortunately, this accelerated deferral of state payments will further exacerbate the situation," according to the letter from the three fiscal leaders.
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