California Gov. Jerry Brown signs bill to stave off cash crunch

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California Gov. Jerry Brown gives a speech at Los Angeles City Hall on January 18, 2012 in Los Angeles.

Gov. Jerry Brown signed a bill Friday that increases how much the state can borrow from special funds to cover a cash shortfall. That shortfall resulted from lower revenues and higher state spending.

The bill allows the state to borrow an extra $800 million from a special fund for transportation to cover cash expenses. It was introduced, passed and signed within days of a warning from the controller that California would run out of cash by the end of the month—unless lawmakers took action.

"People often budget, but we know, at the end of the day, cash is king," Controller John Chiang said.

Chiang says the state spent $2.6 billion more than it budgeted for — and took in $2.6 billion less in revenues than it projected for the six months ending Dec. 31. Chiang says the state would have fallen $750 million into the red early next month.

"Fortunately this is a seven-week cash shortfall," Chiang said. "We’re managing it with one of the strong actions being the governor signing the Legislature’s bill to provide for additional borrowable money."

"We’re going to be able to manage this short-term period without having to resort to IOUs, as was the case in 2009," said H.D. Palmer with the state Department of Finance.

In addition to borrowing from special funds, Palmer said, the Administration plans to delay reimbursement to large medical providers who see patients on state health programs. State universities also agreed to loan the government about a half-billion dollars.

"Now this problem will cease to exist by April," Palmer said, "because as the state begins to get personal income tax returns sent in, then obviously the state’s cash position will improve as well."

Palmer says California’s short on cash in part because courts have blocked some of the cuts to health and human services that lawmakers enacted last year.

State Republicans criticized the Democrats for enacting an unrealistic budget without their input.