SACRAMENTO, Calif. (2/5/09)--California State Controller John Chiang announced an agreement Tuesday with 11 credit unions to provide lines of credit to Californians impacted by the state’s cash crunch, which has forced the controller's office to delay an estimated $3.3 billion in payments during February. “Without corrective action from the governor and legislature, this cash crisis will continue indefinitely,” Chiang said. “I applaud those in the financial services community who are stepping up to help Californians in a time of tremendous need.” Eroding revenues and a chronic structural budget deficit have depleted the state’s cash reserves. On Sunday, the controller’s office began delaying payments to preserve cash flow and make payments required by the state constitution, federal law or court rulings. Eleven credit unions collectively pledged at least $22.4 million to meet the needs of their affected members. They are:
* Alliance CU, San Jose, $250,000; * American First CU, La Habra, $1 million; * Cal State L.A. CU, Los Angeles, $1 million; * Central State CU, Stockton, $1 million; * Firestone Financial Services CU, Anaheim, $100,000; * First Entertainment CU, Hollywood, $5 million; * Health Associates FCU, Orange, $300,000; * SF Police CU, San Francisco, $250,000; * Stanford FCU, Palo Alto, $5 million; * Visterra CU, Moreno Valley, $1 million; and * Water and Power Community CU, Los Angeles, $7.5 million.
Other credit unions and banks have indicated they will--to the extent possible--provide lines of credit and other short-term borrowing solutions on a case-by-case basis to those affected by the cash crisis. The California Department of Finance promised to make available additional special funds for borrowing to pay small businesses on time in February. While these businesses represent a small portion of the state’s private sector contracts, the businesses face penalties up to 92% for each missed payment when a budget is in place.