Treasurer: Calif. may borrow $5B if feds default

AP News
Posted: Jul 13, 2011 8:05 PM
Treasurer: Calif. may borrow $5B if feds default

California's treasurer says the state is preparing to borrow as much as $5 billion in short-term loans if the federal government misses its Aug. 2 deadline to raise the debt ceiling.

Treasurer Bill Lockyer said Wednesday that the loan would be repaid using routine bonds.

California typically borrows money in late summer to pay operating expenses until most income tax receipts arrive in the spring. If the state borrows the money early, California would repay it using routine borrowing notes.

Lockyer, a Democrat, says he wants to have contingency plans in case talks between Republicans and Democrats in Washington, D.C., remain at an impasse. That could force the federal government to default on loan obligations and shortchange states on health care and education funding.