Schwarzenegger Tells Treasury State May Need Emergency Loan
If turmoil in the credit markets continues to impede a state's access to financing, California Governor Arnold Schwarzenegger told the U.S. Treasury that his and other states may need emergency federal loans.
"This credit crisis has the power to grind the U.S. economy to a halt,'' Schwarzenegger wrote in a letter e-mailed to Treasury Secretary Henry Paulson last night, Treasury spokeswoman Jennifer Zuccarelli said in Washington today.
"Absent a clear resolution to this financial crisis that restores confidence and liquidity to the credit markets, California and other states may be unable to obtain the necessary level of financing to maintain government operations and may be forced to turn to the federal Treasury for short-term financing,'' Schwarzenegger wrote.
Rising borrowing costs and declining investor appetite for anything but the safest bonds are forcing states, cities and towns to deter spending on projects from road improvements to maintenance on schools. California may run out of cash at the end of the month if the state can't sell billions in short-term debt, Treasurer Bill Lockyer said Oct. 1.
Schwarzenegger said in his letter that California, the most populous U.S. state, expected to sell $7 billion of revenue anticipation notes in "a matter of days.''
"While some states may be able to absorb a delay or obtain high-interest financing through private banks, California is so large that our short-term cash-flow needs exceed the entire budget of some states,'' Schwarzenegger wrote.
Without the short-term funding, the state may be forced to halt or significantly delay payments for teachers' salaries, nursing homes, law enforcement and ``every other state-funded service,'' Lockyer said.
Published on October 3, 2008
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