Rhetoric reigns as California IOU deadline nears

Sacramento Bee ^ | 6/30/9 | Jim Sanders and Kevin Yamaura

[SmithL]

The quest to balance the state budget remained mired in sharp rhetoric and fruitless votes Monday, as the clock ticked nearer to California running out of cash and paying its bills with IOUs.

Senate Republicans blocked a trio of bills that promised to stave off the need for IOUs for a few weeks. Senate Democrats passed a budget-balancing package of seven bills that Gov. Arnold Schwarzenegger said would be dead on arrival at his desk.

The Republican governor has backed off initial demands to eliminate safety net programs such as welfare-to-work and Healthy Families insurance for low-income children to bridge a $24 billion deficit. But he wants Democrats to accept $2 billion in deeper spending cuts, in addition to an overhaul that reduces pension benefits for new state employees.

Schwarzenegger also wants Democrats to reconsider borrowing $2 billion from local governments rather than raise revenues through oil or cigarette taxes, according to an administration document. He plans to keep state parks open, while he still wants to reduce state worker pay by 5 percent.

Democratic leaders dismissed the possibility of reaching a complete deal on those terms by midnight tonight and accused the governor of leveraging the state's dire situation to impose long-term changes that would help his legacy.

"In the political vernacular and the inside game, they call it a leverage play," said Senate President Pro Tem Darrell Steinberg, D-Sacramento. "And it's not the way to go about working with people."

Democrats said the governor should instead accept a three-bill, $5 billion stopgap solution that would free up enough cash to avoid IOUs through most of July and give lawmakers more time to negotiate the rest of the budget package.

[Oldpuppymax]

Politicians accusing each other of “leverage plays.” Now that’s funny. When have we not heard that the elderly will freeze to death, children will starve, killers will roam the streets at will (as if they don’t now) any time spending must be cut! These people are thugs, from Ahnald on down. Vote-buying, pursuit of power and wealth—these drive politicians and have for decades.

[TheDon]

The banks would be foolish to accept CA IOUs. This state is on the road to bankruptcy.

[Oldexpat]

In the meantime..state tax revenues continue to sink with rising unemployment and falling retail sales. Reduced revenues from realestate taxes on lower property values also loom on the horizon.
We visited several car dealerships looking for a new vehicle and customers were few and far between. Many salesmen have been layed off and the lots are still pretty full. 9.5% sales tax and the $250 registration is not helping car sales.

[Buckeye McFrog]

so who is running the pool on when the Fed bailout is coming?

[headsonpikes]

Someday someone will figure out that the cause of deficit financing is not low taxes or high welfare payments, but rather the bloated payrolls of all government departments, including prodigious benefits even in retirement.

At this time these rent-seeking predators have their talons firmly planted in the guts of the tax-paying producers.

Wild Kingdom will be back after this commercial break....

[Attention Surplus Disorder]

Banks accepting CA IOUs (or not) and presumably, paying out cash is quite a fascinating thought exercise when you really examine the ramifications all down the line. On one hand...thinking of the last time this happened, yeah, no big deal. Really? At that point, CA was solvent, the leg just “couldn’t agree” on a budget. Here, they are arguably insolvent and can’t agree on a budget. That would seem like a really, really crappy credit risk, LOL.

Is CA going to pay interest to the banks? At what rate? The US Tsy can get away with paying the ^IRX (13 week T-bill rate) but only the Feds can print money, haha. Would the Fed accept CA St IOU’s? At face? The Fed is buying up dirtbag mortgages by the truckload. Aren’t these better bets?

On the other hand...here is an an entity (St of CA) which has shown a complete inability to control its’ expenses, has considerable bond interest due, is on the verge of a multi-step ratings downgrade. Great amounts of cashed checks are remitted to Mexico.

A deeper analysis leads to some rather interesting conundrums. I believe Wells and BAC have not yet committed to accepting these.

[I am Richard Brandon]

Could we not take the Cal Dems out and put them on a plane to Venezuala. start at the top and send ten a day until they come up with a permanent fix - the longer they delay, the better for the State!

[Deo volente]

Democrats said the governor should instead accept a three-bill, $5 billion stopgap solution that would free up enough cash to avoid IOUs through most of July and give lawmakers more time to negotiate the rest of the budget package.

TRANSLATION: Democrats said the governor should accept higher taxes right now to free up enough cash to avoid IOU's through most of July, and give lawmakers more time to think of ways to raise additional taxes on hardworking and struggling Californians.

[American in Israel]

The law makers do not need more debt to gain more time to negotiate. That is their full time job which they are failing spectacularly at. They need to perhaps take a little time and go to economics 101. You know, the part that ever person who has a real life knows, that when you don't have money, don't spend?