CA Ins Code Section 1063.58

Refunding bonds issued as provided in Section 1063.57 may be sold, or exchanged for outstanding bonds issued under this article and, if sold, the proceeds thereof may be applied, in addition to any other authorized purposes, to the purchase, redemption, or payment of the outstanding bonds. Pending the application of the proceeds of the refunding bonds, with any other available moneys, (a) to the payment of the principal, accrued interest, and any redemption premium on the bonds being refunded, (b) to the payment of any interest on those refunding bonds, or (c) to any expenses incurred in connection with the refunding, the proceeds may be invested in obligations permitted under the bond resolution authorizing the issuance of refunding bonds.