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Budget crisis leaves businesses in debt

September 5, 2008 12:00:00 AM PDT
The California state budget impasse has reached its 67th day. The stalemate is leaving businesses empty-handed since the state has not been paying its bills.Business owners consider landing a state contract a big deal. However, it can be quite the roller coaster since cash flow in California can be a problem.

Small-business owner Cyndy Mulhern has nearly $1 million worth of invoices the state has not paid since the new fiscal year began July 1.

Her company, Superior Produce, delivers thousands of pounds of fruits and vegetables to state prisons daily.

"We can't pay our vendors, and we're barely able to pay the rest of our bills," said Mulhern.

Mulhern has already spent the $250,000 equity line of credit she borrowed against her house. She is also delaying paying her bills until more money comes in.

"Now we're having to go and get an extension on our line of credit for another $200,000. That's about all we're going to be able to borrow and after that, that's it!" said Mulhern again.

Superior Produce is just one of the numerous small businesses getting stiffed by the state until lawmakers, and the governor, finally agree on a budget. However, there is no sign the stalemate will end soon as Democrats, Republicans and the Governor stand by their own version of the state spending plan.

"We're at an impasse. So you really have three points of view. We have to have one. I'd settle for two right now," said State Senate President Don Perata (D-Oakland).

"Look, I don't think anybody can take any form of pride in being here this late and not getting our job done. So I would say the Legislature clearly has a black eye in not getting the budget done," said Assemblyman Mike Villines (R-Minority Leader).

The state has started 17 of the last 21 years without a budget, so Mulhern expects delays. However, this is the longest budget impasse ever.

Mulhern says her credit lines are maxed out and she really needs the state to pay her so she can pay her suppliers.

"You can't run a business this way. How do they have the audacity to think they can do it?" said Mulhern.

The state must pay late payment penalties on their bills. However, businesses will likely use the extra money to pay interest on their loans -- if they can stay afloat.

 

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