Posted on 06/30/2009 10:52:16 PM PDT by Schatze
California is preparing to issue IOUs to its creditors this week as it grapples with an unprecedented cash crunch and prepares to begin its new fiscal year deep in the red.
Once the US’s richest state, California now has the dubious distinction of having the worst credit rating in the country.
It is facing a budget deficit of $24bn (€17bn, £14.5bn) yet Arnold Schwarzenegger, its governor, and the state assembly cannot agree on a budget that would address the shortfall.
California’s fiscal year ends on Wednesday but as the state’s cash reserves are empty, IOUs will be issued to a range of creditors, including contractors, such as information technology companies and the food service groups that cater for prisons.
“On Wednesday we start a fiscal year with a massively unbalanced spending plan and a cash shortfall not seen since the Great Depression,” said John Chiang, the state controller. “Unfortunately, the state’s inability to balance its chequebook will now mean short-changing taxpayers, local governments and small businesses.”
The state is also likely to issue IOUs to the US government. California currently contributes funding for government-run programmes for elderly and developmentally disabled people but is considering issuing IOUs to cover its contributions because of the lack of cash.
Education funding is protected under the state’s constitution while payments on the state’s bond debt are also guaranteed under state law.
Democrats and Republicans in the state government last week struck an agreement on a range of money-saving measures. However, Mr Schwarzenegger has threatened to veto the plan on the grounds that it was a piecemeal solution to California’s budgetary woes.
Mr Schwarzenegger said he would veto any bills that raised taxes without reforming the state’s government. “I will veto any majority vote tax increase bill that punishes taxpayers for Sacramento’s failure to live within its means,” he said. ”The legislature will have a difficult time explaining to Californians why they are running floor drills the day before our budget deadline. We do not have time for any more floor drills or partial solutions. It’s time for the legislature to send me a budget that solves our entire deficit without raising taxes.”
Anybody who has ever gotten a loan from one of those “payday” loan places knows exactly where this gets you. Dumb move.
I was visiting California recently and watched the local news. Various businesses that had already provided goods and services to the state are looking at financial ruin when they get their nifty little IOU which isn’t worth the paper it will be printed on.
This has been going on for years.
I usually just yawn and change the channel.
the fact that california can issue IOU while maintaining funding for essential services, illustrates they were spending too much money on non-essential services
They bankrupt themselves and now we have to pay for it.
IOUs are a tax, illegally implemented. IMHO. There have to be constitutional rules about how taxes are passed into law. IOUs are a tax, probably not passed correctly.
Someone should sue CA.
The state legislature is run by the Rats. They think the recession doesn't affect them and refuse to see that the gravy train has derailed. They want to keep pouring pork into so-called "economic and social justice" programs.
Yeah, just like the banks, car manufacturers and sub-prime borrowers. But hey, we can always print more money to cover it, right?
Can I send an IOU for my truck registration which is coming due?
The creditors should put a lien on state land and parks. That would really send the Dims over the edge.
The state hasn’t paid the counties for mental health services rendered since December 2008 under an annual fiscal year contract. Consequently, sub-contracted specialty providers have also not been paid by the counties. In our county, the banks have pulled the line of credit on the specialty contractors. The county has about two weeks left of funding in reserve to make payroll for county mental health services. ( Looks like we could be sending the entire mental health program back to the state. )
By borrowing from the school districts, we only have about about two months of funds that could be used to run the entire county government. Investors are now refusing bonds to fund local government. We are waiting to see if the banks will float the state IOUs.
If the state proceeds with plans to balance its budget on the backs of counties, it is sadly mistaken.
Can I send an IOU for my truck registration,NO the stste needs money for food stamps for the illegals don’t you know.
“....IOUs will be issued to a range of creditors, including contractors, such as information technology companies and the food service groups that cater for prisons.”
Will inmates be issued IOUs for meals when food service groups can’t buy the products they need to supply the prisons with food?
Well, that would be one way for Obama to quietly bail out California...
A proposal has been made to close the CA state parks. Earlier I heard Glenn Beck say that the feds said that if that happens CA jeopardizes further funding for the parks and the feds might take them over.
Anyone have a source for this? Have been looking unsuccessfully.
By Paul Rogers
The federal government is threatening to take possession of several of California's most prominent state parks — including Angel Island in San Francisco Bay, the top of Mount Diablo and four miles of beaches at Fort Ord Dunes near Monterey — if Sacramento lawmakers close them to balance the budget.
That's the message from the National Park Service, which also has told Gov. Arnold Schwarzenegger that California will be blocked from receiving future money from the Land and Water Conservation Fund, the leading federal source of funding for parks, if it closes state parks now.
The warnings came in a letter dated June 8 and obtained Tuesday by the Mercury News from Jon Jarvis, the Pacific regional director of the National Park Service, to Schwarzenegger.
See http://www.mercurynews.com/ci_12727075?IADID=Search-www.mercurynews.com-www.mercurynews.com&nclick_check=1
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.