News release: “State Treasurer Bill Lockyer issued the following statement following federal adoption of an economic recovery plan: To meet its cash-flow borrowing needs, the State plans to offer up to $7 billion of Revenue Anticipation Notes (RANs) in a public offering during the week of October 13. The sale will be managed by Banc of America and Goldman Sachs. RAN borrowing is a routine transaction the State conducts nearly every year to ensure it has the money to pay its bills in months when tax collections typically are low. The $7 billion is intended to meet cash needs throughout the fiscal year. However, since the greatest need arises in the spring, just prior to April income tax receipts, the State’s immediate cash needs can be met with a significantly smaller borrowing. So, given turbulent market conditions, the State may sell as little as $3 billion to $4 billion in the upcoming sale. Additional needs would be met with a subsequent sale, as the State has done on occasion in the past.
“In recent weeks, state and municipal borrowers across the country have been frozen out of the capital markets. Hopefully, enactment of the economic recovery plan will end the paralysis in credit markets and allow the State to conduct the RAN transaction. But there are no guarantees the legislation will produce the market conditions that will permit completion of a RAN deal at the best price for taxpayers. So, I will continue to work closely with Governor Schwarzenegger to pursue other options to meet the State’s cash flow needs. One of the avenues we will continue to explore is obtaining a loan from the federal government, and paying interest to the U.S. Treasury instead of banks or investors.”