State raises $7 billion in sale of notes

California sold $7 billion of eight-month notes Thursday, the state’s largest short-term borrowing in four years.

The need to increase borrowing this year stems from the slumping housing market, which has eroded tax revenue.

The state sold $6 billion in short-term notes in fiscal 2005, $3 billion the next year and $1.5 billion in 2007.

The offering, managed by Bank of America Corp., was the largest short-term offering in the municipal market since a $7.4-billion issue by Texas in 2003.

The so-called revenue anticipation notes sold Thursday were priced to yield 3.37%. Last year’s notes sold at a yield of 3.35%.

The tax-free notes, due June 30, carry the highest short-term ratings from Moody’s Investors Service, Standard & Poor’s and Fitch Ratings.

Orders for the debt outstripped the available notes by $2.15 billion, said Tom Dresslar, spokesman for state Treasurer Bill Lockyer.

The treasurer’s office said 23.5% of the notes were sold to individual investors during a three-day “retail-order” period that ended Thursday.

Budget officials last week said the state’s cash receipts fell $777 million below projections for the three months ended Sept. 30.