Schwarzenegger hopes IOUs sway budget debate

Sacramento Bee ^ | 7/2/9 | Kevin Yamamura

[SmithL]

If the stigma of issuing IOUs triggers a budget deal in the coming days, Gov. Arnold Schwarzenegger might find redemption in his strategy of quashing a stopgap solution that would have avoided those non-cash payments.

But if no budget deal emerges soon, Schwarzenegger will have helped saddle the state with a lower credit rating and have nothing to show for it.

As a negotiating strategy, Schwarzenegger is counting on public pressure to mount against the Legislature as California issues IOUs today for only the second time since the Great Depression. The Republican governor could have backed legislation to avert IOUs this week, but he demanded that lawmakers solve the entire budget problem, which grew Wednesday to $26.3 billion.

The state plans to begin paying local governments, businesses and taxpayers with IOUs – formally called registered warrants. The move will hurt the state's already dismal credit rating and incur high interest costs, all the while highlighting California's fiscal failure.

Schwarzenegger and lawmakers alike sought to reach a complete $24 billion budget deal by Tuesday. But as it grew clear how far apart Democrats and Republicans were on taxes and spending cuts, lawmakers fashioned a smaller solution to cut $3.3 billion in school spending that would have preserved enough cash to allow the state to pay its bills.

The governor didn't buy it, however. He enlisted support from Senate Republicans, who ultimately blocked the stopgap plan from reaching his desk.

[SmithL]

Members of SEIU Local 1000, representing 95,000 state employees rally at the West steps of the Capitol on Wednesday, July, 1, 2009. Buses from Southern California, Central Valley and the San Francisco Bay Area arrived in Sacramento to receive the news that Gov. Arnold Schwarzenegger will add a third furlough day to state workers.

[Star Traveler]

Well..., a governor’s got to do *something* to get legislators to get off their duffs and act... what do you expect... LOL...

[GeronL]

IOU’s. wow. And Fed-controlled StimuBanks will take them of course.

[Maceman]

Is the State going to pay interest on these IOUs? Or is it merely going to force everybody to give the state interest-free loans of indefinite term?

[linn37]

I know what its like not to have a paycheck coming in but Lord help me I have a hard time feeling sorrow for state workers.

[Drango]

stigma?

To the Demrats it’s a badge of honor.

[I am Richard Brandon]

And the State still tanks - but are the pols talking?

[cousair]

Several big California banks stated yesterday they would not.....NOT honor any IOU’s. Really can’t blame them considering what the GOV., has said...”no money left to spend”!!

[vikingd00d]

>>Is the State going to pay interest on these IOUs? Or is it merely going to force everybody to give the state interest-free loans of indefinite term?

The state pays interest but they get to determine what that rate is.

The Controller’s FAQ is here:
http://www.sco.ca.gov/5935.html

[WalterSkinner]

..since CA is part of the US which some say is becoming the new Weimar Republic--California's IOUs are about like the Reichsmark circa 1933...

[voveo]

State IOUs or letters of credit are constitutionally illegal as stated in Article 1, sec. 10 - “No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit”

[Miss Behave]

I'll gladly pay you give you an IOU Tuesday for a hamgurger today.

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[Miss Behave]

Beeholed theh nu Kalifunya Haute Coutierz:

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[Miss Behave]

Wen u coming 2 sevs us and brinz us jobzez an cheezburger moniez lik u sedz, O Grate Humin Cheezburger Store Ownr? We sez to youz "O, we luvs u Ocheezbama, an O, we votz 4 u, and u promicez biggy moniez 4 reddy2dig4cheezburerz jobzez, an me reddy 2 digs4demz, an all u an ur totusez dooz is sez blah blah blah CHEEZBURGERS4U blah blah blah uh uh uh (wateverz that werd iz,) blah blah blah CHEEZBURGERS4U blah blah blah...

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[SmithL]

I want my cheeeburger in Paradise!

[goldstategop]

California's powerful public unions are going to make a pinata of any Democrat who votes for real budget cuts - and no Democrat wants to cross them. We're not going to see a budget agreement any time soon.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus

[gorilla_warrior]

They can issue counterfeit Cambodian currency as far as I am concerned. The only “pressure” I will be exerting is a strong recommendation to stop playing games & start cutting bloated government.

[chris_bdba]

I heard a woman this morning on Fox say that her comapny which is contracted for food in the prison system couldn’t keep honoring their contact once their line of credit was gone because the IOU’s can’t be used for it. Looks like the IOU’s won’t be good for many things for very long?

[Miss Behave]

LOL, L! :-)