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State Controller John Chiang, no stranger to budget battles, is once again warning state leaders he may resort to "invasive cash conservation options" before July unless they pass a budget solving the state's $26.6 billion deficit.

The Democrat did not specify what those options might be, but he later referenced actions he took in 2009, which ranged from delayed tax refunds to IOUs.

With or without a budget, Chiang said the state will have enough cash through the 2010-11 fiscal year, which ends in June. But California will fall into the red in July unless lawmakers and the governor enact a spending plan that deals with the state's $26.6 billion deficit before then.

Even though California could pay all of its bills through June without a budget, Chiang said he may need to take actions weeks in advance to conserve cash for the later summer months. It's not a new message, but clearly Chiang is trying to make a point as Gov. Jerry Brown's stated March 10 budget deadline draws near.

Chiang's cash projection sends something of a mixed signal. On one hand, the state has enough cash to keep pressure off lawmakers until late spring or early summer. On the other hand, the only way lawmakers can avoid a cash crunch in July is by acting well in advance. And if Brown's budget is the only viable solution, the state needs to act this month to set up a June election.

"'Defer and deny' is not a strategy for California's prosperity," Chiang wrote in a three-page letter. "For too many years, intense partisanship and the absence of consensus-building leadership have created completely avoidable crises which have only served to amplify and prolong the pain of the recent global recession."

A copy of Chiang's letter can be found here.


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