Water agencies threatened by state
May 8, 2003
The irrational exuberance of investors in the late 1990s created a financial bubble that left the state government with spending commitments it can no longer afford, said a former chief economist for the California Department of Finance.
Ted Gibson, chief economist for the state from 1994 to 2001, spoke Wednesday at Harrah’s Lake Tahoe as part of the Association of California Water Agency’s spring conference.
He said the state is in desperate need of cash as it wrestles with a $36 billion deficit and it may look to use or borrow on a mix of bond money and special funds kept at the state Treasury for local agencies such as water districts.
“The state needs $11 billion to get through the month of July,” said Gibson, speaking to about 2,000 people who work in the water industry. “There’s $17 or $18 billion sitting there in special funds and bonds. If push comes to shove, will they grab that cash? What do you think?”
Audience members groaned.
Gibson said the bond market is losing patience with the state, in part because lawmakers have known about the deficit since the fall and still don’t have a plan to fix the problem.
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Ash Wood of Sutter Securities, a municipal bond corporation that works on water projects, said he thought Gibson’s speech set off appropriate alarms.
“The state may end up borrowing cash from other agencies in order to finance this debt,” Wood said. “The bond market is questioning the ability of the state of California to finance the current operational deficit.”
Andy Rutledge, president of the board of the Antelope Valley-East Kern Water Association, said he found the information presented by Gibson to be scary. Rutledge said his association keeps $39 million in accounts that Gibson said the state may look to borrow on or use.
“That’s money we need to pay for things in the future,” Rutledge said. “Right now we’re putting in a $6 million pipeline and we’re going to have to make payments on it.
“They’re in trouble and there is not an easy way out of it. It’s not Republicans or Democrats or anything else. They’ve got to get together. It worries us.”
— Gregory Crofton can be reached at (530) 542-8045 or by e-mail at email@example.com