Financial institutions in California are offering short-term help to customers not getting paid by the state. The state is holding back $3.3 billion in payments, including nearly $2 billion in income tax refunds, as it deals with a cash crisis and no budget solution.
State Controller John Chiang announced today that eleven credit unions in the state have pledged "at least $22.4 million to meet the needs of their affected customers." That amounts to less than one percent of the money being held back by the state.
The credit unions providing the largest amount of short-term funding are the Water and Power Community Credit Union, offering $7.5 million to affected customers, followed by the First Entertainment Credit Union and the Stanford Federal Credit Union, each offering $5 million in funding. "Other banks and credit unions have indicated they will, to the extent possible, provide lines of credit and other short-term borrowing solutions on a case-by-case basis to those affected by the State's cash crisis," Chiang's office said in a statement.
The state's Finance Department is also making "special funds" available for the controller to use to pay small businesses on time in February. Even though these businesses are only a small part of California's contracts, "they carry the highest penalties." Those penalties could be as much as 92 percent for missed payments. Also, the federal government is stepping in to cover the state's portion of social security payments.
Meantime, California is now officially in last place in credit ratings. Standard & Poor's downgraded the state's to "A/Stable". It had previously been "A+/Watch Negative", tied it with Louisiana.