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Chiang Comments on Budget Agreement
State Controller John Chiang
FAQ State Controllers Office
Estimated General Fund Disbursements for February 2009 For schools and Higher Education
Important Information for Cal Grant Recipients

Chiang Comments on Budget Agreement

February 19, 2009

SACRAMENTO – State Controller John Chiang today issued the following statement on the Legislature's approval of a new budget to address the State's $41 billion budget deficit:

"It took the Governor and Legislature three months to agree on a solution to California's budget problems and left us today without enough cash in the State's bank account to pay all of our bills, paralyzed public works projects and made California the worst credit-rated state in the nation.

Today's budget agreement is a long overdue step that does not immediately fill our treasury that has run dry. Because I have been forced by this situation to delay paying $3.3 billion this month to local governments, state contractors and even taxpayers themselves, the State still owes them the gratitude for their patience and for shouldering the real burden of gridlock.

The Department of Finance has promised to provide us within a week with the data we will need to update our cash flow analyses and determine how to manage the State's payments through the end of the fiscal year. Once this budget plan provides the needed cash in the treasury, my office will work around the clock to get delayed payments out the door."

State Controller, John Chiang

As State Controller, John Chiang is responsible for ensuring the State has sufficient funds to meet its financial obligations.

With no signs of an economic recovery in sight, it is critical that the Governor and the Legislature enact a sound budget solution that provides much-needed cash by February 1. If not, the State will be $346 million in the red at the end of February, and $5.2 billion in the red in April.

In order to preserve cash for education, debt service and other payments that are deemed by the State Constitution, federal law or court rulings as having first claim to available General Fund cash, the Controller announced he will begin delaying, for 30 days, payments to all other programs that are funded out of the State's depleted General.

Those payments that will be delayed include thousands of payments to businesses for services and products they provide to the State; to assistance for more than a million aged, blind and disabled Californians that goes to pay their rent, utilities, or put food on their tables; to State agencies that use the payments to fund critical public services, ranging from public safety to health and welfare.

The delay in payments also will apply to tax refunds that millions of individuals and businesses have earned, expect and deserve. Not only will the 30-day delay in refund payments cause significant financial harm to California families, it will delay the economic stimulus expected from consumer spending. Postponing the payment of tax refunds also will ultimately cost the state tens of millions of dollars in interest payments if those payments are postponed beyond the date prescribed by law.

If the Governor and Legislature fail to provide real and adequate solutions by late February, the Controller said he will be forced to postpone those payments for another 30 days.

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Estimated General Fund Disbursements for February 2009 For schools and Higher Education

Important Information for Cal Grant Recipients

The State Controller's Office has received the following information on the effect of a 30-day delay of payments to the Cal Grant program. This page will be updated as new information becomes available. Students with questions or concerns should contact their institution's Financial Aid Office for specific information, click here.

University of California
A 30-day delay of payments to the Cal Grant program is expected to have no practical impact on UC students. A January 28 letter from the President of the UC system directed UC chancellors to take temporary measures to fund Cal Grant through the end of this fiscal year.

California State University
A 30-day delay in payments to the Cal Grant program is expected to have no practical impact on CSU students. A January 15 letter from the Chancellor to CSU presidents directed universities to cover Cal Grant A payments by deferring student payment of the University fee. Students who receive a cash stipend through Cal Grant B will be covered by Pell Grant awards and be given access to short-term emergency loans to manage the shortfall. These actions are expected to fully cover all students through at least the initial 30-day deferral period.
CSU press release on Cal Grants

Community Colleges
Our office has been informed that a 30-day delay of payments to the Cal Grant program may impact a small share of community college students. Community College students receive these payments at the beginning of a term, and with 106 of 110 community colleges starting in January, most of these payments have already been made. For students at the three community colleges on a quarterly system, the Chancellor of Community Colleges is taking steps to mitigate impacts on the remaining students.

Private Institutions
Our office has been informed that private colleges and universities are trying to mitigate the impact of the delayed payments by borrowing from internal funds and seeking loans from banks. The overall impact is expected to be minor.