After Years Of Record-High Borrowing, California Reaches Fiscal Milestone

Controller John Chiang discusses his decision to halt paychecks for all 120 state lawmakers after they failed to come up with
Controller John Chiang discusses his decision to halt paychecks for all 120 state lawmakers after they failed to come up with a balanced budget by the June 15th deadline, during an interview with the Associated Press in Sacramento, Calif., Tuesday, June 21, 2011. Chiang said that he found the plan passed by Democrats on a simple majority vote last week was not balanced and therefore lawmakers did not meet the requirement for getting paid under Proposition 25, passed by the voters in November. (AP Photo/Rich Pedroncelli)

By Robin Respaut

July 10 (Reuters) - California has ended its fiscal year with cash left over in its general fund for the first time since 2007.

State Controller John Chiang said on Thursday that California wrapped up June with a positive cash balance of $1.9 billion. This suggests the state has reached a stable financial foothold with enough money in its day-to-day operations budget to meet obligations without borrowing from other state funds or from Wall Street.

The cash-positive balance is another sign of fiscal recovery after seven years of "record-high borrowing just to pay our everyday bills," Chiang said in a news release. But he added, "We should remain laser-focused on paying down the Wall of Debt, reversing the many accounting gimmicks to which we've become addicted and keeping the State as liquid as possible to avoid experiencing the payment delays and IOUs that plagued our State during the Great Recession."

During the fiscal year ended June 30, the state controller's office collected $101.6 billion in revenue, or 2.1 percent more than Governor Jerry Brown had projected in his January budget release. Personal income taxes totaled $66.2 billion, or 2.6 percent higher than expected. Corporate taxes hit $8.5 billion, 9.3 percent higher, and retail sales and use taxes reached $22.2 billion, 1.8 percent more than expected.

A state particularly susceptible to swings in the economy, California has enjoyed the U.S. stock market's five-year surge. But "another down cycle in the economy is inevitable," Chiang said. "We should be vigilant about preparing for that day while we celebrate the great progress we've made to date."

Last month, in another positive reflection of the state's finances, Moody's Investors Service upgraded California's general obligation debt to "Aa3" from "A1," citing the state's improving financial position and employment growth.

(Reporting by Robin Respaut in Riverside, Calif.; editing by Matthew Lewis)



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