Judgment day comes July 29, when the state won't have enough cash needed to meet its payment obligations. On that date, according to State Controller John Chiang, California will be in the red by $317.1 million. Two days later, the number will jump to $1.02 billion, and by April 2010 the shortfall will reach $22 billion. Wowser. Chiang laid out the bad news in a letter to Gov. Arnold Schwarzenegger and legislative leaders.

As a precautionary measure, I am preparing to sell Revenue Anticipation Warrants (RAWs) to address part of the cash shortage. While I would prefer to avoid them altogether, prudence demands contingency planning. To complete the borrowing needed by July 29, my office will have to meet with credit rating agencies and launch a major investor outreach effort in mid-June. Without credible budget and cash flow solutions in place, the rating agencies and potential investors who will be evaluating the credit risk of these securities will be highly skeptical about investing in California.

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The State's chronic inability to resolve its structural budget deficit, the fact that the State has not had a positive cash balance since July 12, 2007, and has had to borrow internally from special funds, and the collapse of the global credit markets all have significantly limited the State's ability to borrow from Wall Street.Simply-stated, the State will not be able to borrow its way out of this crisis. Tough decisions cannot be avoided.