California to delay payments sooner than expected

WEST SACRAMENTO — Gov. Arnold Schwarzenegger, the state controller and treasurer decided Monday to delay $2.9 billion a month in payments to school districts and counties sooner than expected so the state can meet debt and pension obligations.

The leaders issued a joint letter notifying state lawmakers of their decision to begin withholding the payments in September instead of October.

The move reflected the limited resources the state has to work with as the impasse over California's $19 billion budget shortfall has dragged on for nearly two months.

Controller John Chiang has warned that the state could again issue IOUs, perhaps as soon as the end of August.

The Legislature gave authority in February to the three officers to delay $2.5 billion a month in payments to schools and $400 million in monthly payments to counties during October, November and December to help manage cash flow.

The step came on top of a July deferral of $2.5 billion for schools and $700 million for counties.

Bob Wells, executive director of the Association of California School Administrators, said the state is only shifting its problems to school districts.

"What started as not a big deal from one day to the next is now delaying $10 billion from schools for many months and school districts still have to meet payroll," Wells said.

The governor's finance spokesman H.D. Palmer said most school districts should be able to endure the delayed payments because the state issued the notification within the same fiscal year.