California Facing Cash Crunch

The state simply does not have enough money in our bank accounts to pay our bills. That means we will need to borrow a bunch of money. Bloomberg:

Jan. 24 (Bloomberg) -- California may need to borrow as much as $9 billion later this year to pay bills, as the most populous U.S. state faces its biggest cash shortage since 2003, a budget official said.

Governor Arnold Schwarzenegger's finance office estimates the state will need to sell $9 billion of short-term notes in September to cover cash needs for the fiscal year that begins July 1. That compares with $7 billion borrowed in November for this year's operations.

The cash crunch springs from slowing revenue growth over the last 12 months following the worst housing market slump in 16 years. Schwarzenegger last year saw a budget surplus transformed into a $14 billion deficit. Fitch Ratings has warned that California's credit ratings on $49 billion of debt are in danger because of the cash shortage.

The worse our credit ratings, the more expensive it is for us to borrow, just like any other borrower. This is somewhat routine for the state, but it is a jarring number all the same.