california update 6 22 01 executive summary state budget discussions deteriorating bonds issuance jeopardized pg e bankruptcy advisor comments socal budget bond concerns sources report discussions within state budget conference committee completely disintegrated although last tuesday tentative 2 7 b reserve agreement parties offered hope situation republicans since completely broken democrats begging number nearly half previously agreed amount legislative recess scheduled begin july 20 th prior davis administration legislature rarely took month long recesses due budget battle usually democrat controlled legislature republican governor sources report legislators take leave without budget resolution would likely compromise ability pass budget mou mou deadline aug 15 th sources also indicate delays establishing state budget could prompt wall street investors downgrade california credit rating lowered rating could complicate 12 b bond issuance state expects offer late september 2001 forcing state offer higher rate return could mean fewer bonds sources recently conducted private interview parties close david wiggs head la department water power dwp constant contact socal pg e creditor utilities dwr wiggs close constant contact governor davis hertzberg burton knows every state official relevant energy issues wiggs position bonds socal follows state really worried bond issuance state believes sell 3 b bonds 11 12 b confident state currently trying put revenue streams place prep wall street regarding revenue streams wiggs saw treasurer angelides wednesday 6 20 told buy bonds wiggs stated clear enough path rates wiggs hertzberg advisor energy also el paso energy company gas company bankruptcy wiggs commented worried lives socal territory rather dwr territory wiggs dwr staff believe mou plan b deal pass thinking terms counting votes rather large number things need done simultaneously order make solution work pge advisor socal sources recently interview attorney currently acting bankruptcy advisor pg e may potential advisor socal bankruptcy proceedings comment follow attorney believes likelihood socal voluntary filing 60 70 know happen attorney would speculate likelihood involuntary filing stating know concern expressed solution passed make socal liquid dwr instructions state would refuse purchase net short leaving socal huge bill power could pay socal would faced borrowing money pay bill unlikely event given current status declaring bankruptcy attorney commented dwr already tried send power bills pg montali refused force pg e pay attorney therefore believes dwr likely force socal pg e made solvent resume paying power soon possible attorney believes socal aware problem must taken account part bailout solution