SACRAMENTO, Calif. – The Golden 1 CU was among six financial institutions this week that bought a total of $6.7 in interim short-term notes to help the state of California pay delinquent bills that piled up during the state’s record-length budget impasse.
California, the largest U.S. issuer of municipal debt, agreed to pay 1.4% to the institutions for the bridge loan, according to state Treasurer Bill Lockyer. He will repay the debt in about two weeks when he sells an estimated $10 billion of revenue anticipation notes, a short-term municipal bond the state offers when cash is low and repays from later tax collections.
The Golden 1 subscribed to $250 million of the short-term IOUs, while JP Morgan Chase bought $3.12 billion, Goldman Sachs $1.5 billion, Wells Fargo $1 billion, Citigroup $500 million and Morgan Stanley $250 million.
The bridge loan was needed because California ran up $8.4 billion of bills that couldn’t be paid in the 100 days California was without a budget. Gov. Arnold Schwarzenegger signed the spending plan Oct. 8 after lawmakers agreed on steps to eliminate a $19 billion deficit brought on by the recession. As part of the plan, lawmakers delayed about $5 billion in subsidies for schools and colleges until later in the year to ease the cash crunch.
