SACRAMENTO — California Gov. Jerry Brown released a revised budget Monday that dramatically reduces planned bond issuance as part of an effort to narrow overall state borrowing.
The state already skipped its usual springtime general obligation bond issue at Brown’s behest. The revised budget proposal calls for selling only about $1.5 billion of GO bonds in the fall, as the state’s only GO issue of calendar year 2011, after selling $10.5 billion of GOs in 2010.
The state treasurer’s office projected in an annual report in October that it would sell $9.9 billion of GO bonds in fiscal 2012. Brown’s budget proposal would cut that issuance about 60% to $3.9 billion — $1.53 billion in the fall and $2.37 billion in the spring. The governor also proposes to sell $2.04 billion of lease revenue bonds in fiscal 2010, about half in the fall and half in the spring of 2012, according to the treasurer’s office.
“That’s really the big story,” Brown said during a press conference Monday. “Reducing the wall of debt.”
During his presentation, Brown pointed to the state’s $48.2 billion of authorized and unsold bonds and $81 billion of outstanding bonds as part of a “wall of debt,” a description that also includes many intrafund budget transfers and payment deferrals.
The decrease in the size of the fall bond sale will be accomplished by using unspent existing bond proceeds —in excess of $11 billion — more efficiently, according to the new budget.
Ana Matosantos, head of the Finance Department, said the state still plans to go ahead with its annual sale of around $10 billion of revenue anticipation notes. It is usually slated for the summer.
Brown’s revised budget calls for $88.8 billion in general fund spending that would leave a $1.2 billion reserve at the close of fiscal 2012.
California governors release a “May Revise” budget proposal every year to reflect circumstances that change after the initial January budget proposal.
Like his first proposal, Brown’s revised budget assumes that lawmakers and voters will approve some temporary tax increases this year, even though Brown was unable to persuade minority Republican lawmakers to agree to the original proposal he made in January.
That could prove troublesome for California’s planned Ran sale, Treasurer Bill Lockyer said in a statement.
“If full implementation of the governor’s FY 2011/12 plan remains contingent on voter approval of taxes, my office will not be able to complete a cash-flow borrowing transaction unless the final budget includes real, inescapable, quickly implemented spending cuts that would be triggered if voters reject the taxes,” he said.
The budget task has been eased by a more than $6 billion increase in the Department of Finance’s revenue forecast for combined fiscal 2011 and fiscal 2012.
Brown’s original budget, an effort to plug a $26 billion hole in the $86 billion general fund budget, mixed spending cuts with revenues from the tax extensions and from his plan to shutter redevelopment agency tax districts.
Most of the cuts have been approved. Brown has signed into law $11.2 billion worth of solutions to fill the gap, most of them spending cuts, out of $14 billion passed by the Legislature. The governor, a Democrat, was unable to garner votes from the Republican minorities in the Legislature to obtain the two-thirds majority needed to call the special election.
Brown Monday confirmed that he continues to support a plan to shutter the state’s redevelopment agencies, another proposal that foundered earlier this year because Republican opposition denied him the necessary two-thirds votes in the Legislature.
Brown ended negotiations with GOP lawmakers seen as potential swing votes after failing to find common ground on a package that would include pension reform, reduced business regulations, and a spending cap in return for allowing the tax vote to proceed.
He said Monday, however, that he continues to have discussions with a few Republican lawmakers.
On Thursday, Assembly Republicans released their own budget proposal they say would balance the budget primarily with cuts, and without any of Brown’s tax extensions.
If the budget stalemate takes too long, the state again may be forced to issue IOUs to preserve cash.
In 2009, Controller John Chiang issued $2 billion of IOUs, which the state ultimately redeemed after a budget was in place.
The state’s fiscal year ends June 30, but last year it took lawmakers until Oct. 8 to pass a budget.
California GO bonds carry ratings of A1 from Moody’s Investors Service and A-minus from both Standard & Poor’s and Fitch Ratings.
