Rescue California

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State Faces Hefty Bridge Loan Cost
Because its credit is in a shambles, California could pay up to $271.6 million in interest for $11 billion it needs to remain solvent through the summer

May 23, 2003

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with Standard & Poors and Moodys Investors Services were concerned about when the Legislature would act on the budget and whether it would approve the cuts and tax increases called for in the governor's revised budget.

"They recognize what's left to do is the more difficult stuff," he said. "They, as well as the banking community, are obviously watching the Legislature very carefully.

"I don't know that the significance of the situation is fully appreciated in the Legislature," Peace said.

Bankers and financial consultants who do business with the state said they have grown impatient with California lawmakers, particularly after last year's budget fell billions of dollars out of balance shortly after it was approved.

Yet lawmakers have so far made only marginal progress.

As finance officials sought to persuade bond raters that action was being taken to balance the budget, lawmakers in Sacramento were moving to restore more than $1 billion in spending that lawmakers cut only weeks ago.

So far, the state has been able to make only $6.9 billion in budget reductions. With the July 1 constitutional deadline for approving a spending plan looming, the Legislature still has a $30-billion problem on its hands.

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