Volume I, No. 10

January 22, 2009

PMIB Continues Freeze

By Ernest Silva -- esilva@m-w-h.com

The Pooled Money Investment Board (PMIB) held its meeting on January 16, 2009 and decided to continue the infrastructure freeze.  In addition, the PMIB postponed approving new loan requests.  They will meet again in early February to determine whether sufficient budget action has taken place to reconsider these actions. 

The PMIB approved disbursement of up to $650 million over the next six months to projects recommended by the Department of Finance (DOF) to be exempted from the disbursement freeze. There are 18 School Facility Program projects totaling $35 million on the recommended exemption list. However, if there is no state budget by February 1, even the projects recommended by DOF to receive a disbursement may have to stop.

DOF said the total of the 276 projects (out of the 5,600 projects impacted if no more loans are made) is $1.129 billion. The $650 million is what DOF thinks will be needed in the next six months for the 276 projects. The criteria used by DOF to recommend an exemption from the disbursement freeze includes the cost to shut down the project, project nearly complete, legal cost, court orders, public safety, and alternative funding sources.

There, again, were calls by the PMIB Members for quick budget action to address the cash flow and credit crunch double whammy that lead to the freeze. 

DOF Director Michael Genest said several times during the discussion that he was “hopeful” there would be a budget resolution by February 1. It is important to recognize that State Treasurer Lockyer said that even if there is February 1, 2009 State Budget, there will be significant delay in getting bonds to market and finding investors.