County grapples with state IOU’s
July 10, 2009
El Dorado County received $113,828 in IOUs from the state this week.
The three registered warrants – promise-to-pay notes issued by the state when there are not enough funds to pay all of its General Fund obligations – were for the Health Services Department.
The county plans to cover the amount owed in the IOUs through internal borrowing from special revenue funds, El Dorado County Supervisor Norma Santiago said in an e-mail.
The IOUs do impact the county’s cash flow, Santiago said, but the county auditor and treasurer can manage the funds this fiscal year through this internal borrowing. Some areas the county can borrow from include Retirees Health and Department of Transportation Traffic Mitigation Funds, in anticipation that the state will pay the county back.
“If the state stops issuing IOUs, then it’s a totally different ball game,” Santiago said. “At that point, the county has no option but to start eliminating services.”
An IOU for $77,754 was for the California Children’s Services program, which provides treatment and diagnostic services for eligible children with serious medical conditions, said Health Services spokeswoman Margaret Williams. The department billed the state and followed protocol, but received the IOU anyway.
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A second IOU is for the administrative costs for the program, and a third IOU for $28,535 is for the Children’s Health Disability Prevention program, county Auditor-Controller Joe Harn said.
The CDHP program provides periodic health assessments and services to low-income children and youth in California.
“Our staff in Health Services is hopeful that the state will reimburse the county as soon as possible,” Williams said. “We are aware, however, that there is a possibility that the state may not have funds to pay this and other (IOUs) issued for some months.”
According to John Chiang, state auditor-controller, registered warrants may be redeemed on Oct. 2 if enough cash is in the treasury. If the Pooled Money Investment Board determines cash is available, then IOUs can redeemed sooner than October. The interest rate set by the board on July 2 is 3.75 percent per year.
Santiago said the county relies on the state to fund many services in the community, and would like to see the budget crisis resolved.
“However, the state will continue to face these difficulties unless it begins to address the structural issues related to the budget,” Santiago said.
Some solutions include instituting a pay-as-you-go policy and changing the budget from a one-year budget to a two-year budget.
Many of the aforementioned issues were discussed in November at the California State Association of Counties meeting, Santiago said. Another CSAC meeting is scheduled for July 17-18 where county officials will make budgetary recommendations for the governor. Santiago said she plans to attend the meeting.
As for Lake Tahoe Unified School District, the state would defer payments instead of handing out IOUs, Superintendent Jim Tarwater said.
“We’re watching (the IOUs) right now so we can be ready if they defer payments,” Tarwater said.
The district already has taken measures to ensure it can make payroll for the 2009-10 school year by borrowing $4 million. It normally receives state funds before the start of school in September, but this year the state won’t provide funds to the district until October. To ensure the district can pay its September payroll, the school board voted in May to issue Tax Revenue Anticipation Notes – a short-term cash-flow fix to create an additional reserve to the general fund.
The funds will act as a cushion if LTUSD has temporary cash-flow problems.
El Dorado County is issuing the TRAN – which are bonds sold with less than 6 percent interest – and almost all the county school districts are participating. The El Dorado County Office of Education will give the districts their share as needed.