Free Republic

The retirement nest egg of an entire generation is stashed away in this small town along the Ohio River: $2.5 trillion in IOUs from the federal government, payable to the Social Security Administration. It's time to start cashing them in. For more than two decades, Social Security collected more money in payroll taxes than it paid out in benefits — billions more each year. Not anymore. This year, for the first time since the 1980s, when Congress last overhauled Social Security, the retirement program is projected to pay out more in benefits than it collects in taxes — nearly $29...

State Controller John Chiang said Tuesday that without a state budget, California's government would be unable to pay its bills in late August (or maybe early September). That means issuing IOUs to some people. Possible dates for IOUs could be either Aug. 27 or Aug. 31, when big payments to schools are due, according to this schedule on the controller's website. This announcement, in the upside down world of California's badly broken budget politics

A California vendor sued state officials Wednesday for paying bills with IOUs, calling the notes an unconstitutional dead weight on small businesses everywhere. The lawsuit, filed one day after Gov. Arnold Schwarzenegger signed a new budget agreement, highlights California's continued cash problems. Despite the budget deal, state Controller John Chiang will continue issuing IOUs to pay certain bills until he's convinced the state has sufficient cash, said his spokeswoman Hallye Jordan. Since July 2, Chiang has disbursed more than 222,000 IOUs worth a combined $1.1 billion to vendors, taxpayers owed refunds and local governments that deliver social services with state...

CalPERS expected to report losing nearly one-quarter of investment portfolio The estimated $56.8-billion drop at the U.S.' largest pension fund, the second annual loss in a row, would have a huge effect on what state and local governments must shell out to support retirees. Marc Lifsher July 20, 2009. Reporting from Sacramento -- California's huge government pension fund is expected to report on Tuesday a whopping annual loss of an estimated $56.8 billion, almost a quarter of its investment portfolio. The loss at the California Public Employees' Retirement System for the fiscal year ended June 30 is the second in...

The first, which will have the most visible impact on John/Jane Doe, is in relation to California's financial woes and their issuance of IOUs. While certainly rare enough (fortunately), the issuance of IOUs by a state in lieu of payments isn't without prescedence. California did the same thing back in '94. What has changed between then and now, is the response of banks to the issuance. Back in 1994, the banks all accepted the IOUs as legal tender, so once the public got over the initial shock, they quickly found that they could deposit the scrip into their accounts and...

Illegal Immigration: As California issues IOUs to its citizens, another ballot proposition may be brewing to cut off benefits that are draining the state budget. From education to welfare to crime, the cupboard is bare.California is a leader in both government debt and the sanctuary city movement. But as its citizens seek shelter from the economic storm, the question has arisen anew whether its non-citizens and the better life they want takes precedence over its citizens and the better life they are entitled to. In this mother of all recessions, it's getting harder to argue that illegal aliens are here...

The president of the University of California (UC) said on Friday he would propose to its regents that they approve pay cuts through furloughs to shave $515 million from the public university system's costs amid the state's broader budget crisis.

NEW YORK (CNNMoney.com) -- Californians will have fewer places to redeem IOUs issued by the cash-strapped state after Friday. At least three major banks, Wells Fargo (WFC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Bank of America (BAC, Fortune 500), will stop accepting the IOUs, as they'd previously announced. More than 60 credit unions, however, will continue to accept the paper.

WASHINGTON -(Dow Jones)- U.S. regulators told banks Wednesday that registered warrants being issued by the state of California will be treated similarly to other general obligations of the state.... For capital purposes, the guidance from regulators said, this means the warrants would receive a 20% risk weight

Fitch Ratings cut California's long-term general obligation bond rating by two notches to BBB, the second cut on the rating since late June, based on the state's inability to achieve an agreement on its budget and cash flow solutions amid its severe financial crisis. Legislators in the state have been deadlocked for more than a month on ways to close what is now a $26 billion deficit in a $92 billion general-fund budget. The state plans to issue a little over $3 billion in IOUs to thousands of creditors this month after lawmakers failed to come to an agreement on...

Bank of America will accept California IOUs, but it won’t credit depositor accounts for at least a week. The fine print was included in an interview in Monday’s American Banker with a BofA spokeswoman.

Bank of America Corp. says it will accept warrants issued by California’s state government through July 10. BofA says the state’s budget crisis prompted its decision. “To support our customers, while giving the state legislature additional time to pass a budget, we will accept California state-registered warrants — or IOUs — from existing customers and clients,” Charlotte-based BofA (NYSE:BAC) says in a written statement.

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...

Regulation: Ignoring the first rule of holes, a bankrupt state passing out IOUs welcomes an EPA waiver allowing it to further kill its economy. Too bad the state can't stop the air pollution imported from a growing China. The U.S. Environmental Protection Agency on Tuesday granted California its long-standing request — denied by the Bush administration — for a waiver to allow it to impose even more stringent air pollution rules than currently required by the federal government.The way is now clear for implementation of a 2002 state law requiring new cars to increase their fuel economy 40% by 2016....

With the California controller getting ready to send out the first batch of IOUs on Thursday, banks in the state are still trying to figure out if they want to buy the warrants from depositors. If they decide not to, get ready for crunch time and most likely the emergence of some kind of distressed debt market that will scoop up the IOUs - at a price - from those desperate for cash. Just because the IOUs are sent to a specific person, business or local government doesn’t mean that they can’t be traded in or simply just traded. Whoever...

Facing what could be the largest cash flow problem in state history, California officials are asking the federal government to back billions of dollars in short-term loans the state must seek in July. "We're going to need cash-flow borrowing the likes of which California has never seen, at a time when market and economic forces are stacked against us," said Tom Dresslar, spokesman for state Treasurer Bill Lockyer. "That's a recipe for calamity." While the state routinely borrows money at the start of fiscal years on July 1 by issuing interest-bearing Revenue Anticipation Notes, or RANs, a combination of factors...

With Gov. Arnold Schwarzenegger's veto of Democrats' $18-billion package of tax hikes and cuts, the state could begin issuing IOUs as soon as Feb. 1. GOP legislators join a suit against the package. State officials on Tuesday braced for the possibility of delaying tax refunds to millions of Californians, along with student grants and payments to vendors, as the latest round of budget negotiations between Gov. Arnold Schwarzenegger and Democratic legislators collapsed. With little more than a month's worth of cash left in the state treasury, the governor and lawmakers have been unable to agree on how to erase a...

Sacramento -- State Controller John Chiang, who oversees California's cash flow, warned state agencies Tuesday that unless Gov. Arnold Schwarzenegger and the Legislature agree on a budget, the state will have to begin issuing IOUs to some state employees and contractors as early as Feb. 1. "Without immediate cash solutions or the ability to borrow billions from the strained financial markets, the state controller's office has no choice but to pursue the deferral of potentially billions of dollars in payments and/or the issuance of ... IOUs," Chiang wrote in a letter to state agencies. Tuesday, Chiang was still in the...