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California plans to borrow $5B ahead of debt deadline

July 22, 2011 12:00:00 AM PDT
If the federal government defaults on its debt, California plans to borrow about $5 billion from private investors.

State Treasurer Bill Lockyer says he's asked a select group of banks, credit unions and investment firms for bids on private loans.

Lockyer said he's concerned the state could get short-changed on health care and education funding.

The loan is scheduled for one week before the federal government faces default unless a deal is reached to extend the government's borrowing authority.

The treasurer's office is taking the precaution because it's unclear whether California would be able to borrow that much money if global credit markets are thrown into turmoil.

The state typically borrows money in late summer to pay operating expenses until most income tax receipts arrive in the spring.

California currently has the lowest credit rating among the 50 states at "A-." It's not clear how much the additional loans could cost California taxpayers.

The Associated Press contributed to this report.

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