SACRAMENTO (CBS / AP) — California’s state treasurer said he is preparing contingency plans in case the federal government misses its Aug. 2 deadline to raise the debt ceiling.

Treasurer Bill Lockyer said Wednesday that the state is preparing to borrow as much as $5 billion in short-term loans to cover state operating expenses if the federal government begins to run out of money to pay its bills.

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KCBS’ Doug Sovern Reports:

The loan would be repaid using routine bonds.

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Lockyer, a Democrat, said he wants to act before Aug. 2 in case talks between Republicans and Democrats in Washington, D.C. remain at an impasse.

That could force the federal government to default on loan obligations and shortchange states on health care and education funding.

Lockyer warned that a federal default could negatively affect state and local government borrowing costs.

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