Add this morning's new report from the Legislative Analyst's Office to the growing chorus of warning signs about the fiscal year that lies ahead for California.
The LAO believes that the weakened economy, the shaky budget, and the defeat of the budget-related ballot measures could force state government to seek as much as $23 billion in short-term borrowing from investors in the budget year that begins on July 1.
And now, the kicker: that might be impossible to pull off.
The new report examines the latest data on the state's cash crunch saga. If you're confused, a quick explainer: unlike a budget deficit, which is a projection of too little money over a full 12-month period, a cash crunch is a shortage of dollars in the bank in any given month to pay the bills.
State government almost always has some sort of cash crunch, as tax revenues typically flow in during the second half of a fiscal year... while most bills and invoices are due in the first half of the fiscal year. As such, some amount of short-term borrowing by the state is common, as it is with many private businesses facing their own temporary mismatch between profits and expenses.
But the cash flow problems have become a major problem over the past year. By the end of 2008, the state was doing everything it could to preserve cash in hand... from postponing infrastructure projects to delaying income tax refunds.
The new LAO report says those problems will return in the fiscal year beginning July 1, and with a vengeance. In fact, the LAO predicts the state will begin the 2009-2010 year with only about one third of the cash it had on hand at the same juncture just three years ago.
The shrunken cash total as of July... plus the weak economy and its whack at tax revenues... leads the LAO to now predict that "the state's borrowing requirement from private investors in 2009-10 may be somewhere around $17 billion."
And what if Proposition 1C, Proposition 1D, and Proposition 1E all fail? "Rejection of these measures," says the LAO report, "could cause the state's investor borrowing requirement to swell to around $23 billion."
That's an amount that experts say would be pretty impossible to raise on Wall Street, which is why the LAO is urging legislators to ease the cash crunch by 50%, either through... you guessed it... program cuts or tax increases.
And to add to the fun, here's another important bit of advice from today's LAO report: lawmakers should be cautious in accepting help from the feds.
Numerous discussions in recent months have focused on asking the Obama administration for help on the cash crunch issue -- either by the feds backing our short-term loans or by actually loaning the state the money. But the LAO says that recent experience indicates federal officials would attach some strings to the money.
Most interesting, says the LAO: "the federal goverment... could insist on a binding, multiyear budget balancing plan from the state, or the ability to assume some sort of operational control or oversight of state operations in certain cases."
That might probably cement the simmering notion that California is... well, ungovernable.