After nearly two months of delays, the California Controller’s Office is freeing up $2.8 billion in payments to vendors and taxpayers. The payments were delayed while the state legislature finalized its 2009 budget.

The newly-passed California budget reduces the expected $5.1 billion shortfall down to $630 million. California will borrow an additional $1.5 billion to make up the difference and to ensure the government can continue providing services.

California Controller John Chiang ordered a freeze on most government disbursements in February when a quick end to the state’s budget crisis looked unlikely. In addition to freezing many tax refund and student loan disbursements, the government began delaying vendor payments and county welfare disbursements by 30 days.

According to information released by the Controller’s Office, the delayed disbursements will be made over the next several weeks in a “first on, first out” basis. Chang adds that there is no guarantee similar payment delays won’t occur again in the future.

“While progress was made, this recent budget deal does not put California’s fiscal house in order,” he says. “While current-year cash flow problems appear to be manageable, early projections indicate the recently-enacted budget did little to guarantee there would be sufficient cash solutions to meet the State’s payment obligations for the coming fiscal year.”

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