California’s controller said Friday he will be forced to impose a 30-day delay on tax refunds and some other payments starting Feb. 1 if lawmakers fail to agree on a plan to erase a nearly $42 billion budget deficit.
Controller John Chiang, who acts as the state’s accountant, said he will have no choice but to delay $3.7 billion in payments next month because the state is running out of cash.
Doing so, he said, would buy the state a few more weeks before its accounts run dry. The state is on the brink of issuing IOUs as it faces a $41.6 billion shortfall over the next year-and-a-half.
“Let me make this perfectly clear: This is a painful decision,” Chiang said during a news conference in Sacramento. “It is an action that is critically necessary. The fallout from issuing IOUs, or for the state going into default, are significant and long-lasting and something to be avoided at nearly all costs.”
A severe drop in revenue from sales, property and capital gains taxes has left the state’s main bank account depleted. The state has not had a positive cash balance since July 12, 2007, Chiang said.
The state had been relying on borrowing from special funds and Wall Street investors, but those options are no longer available. Democratic and Republican legislators and GOP Gov. Arnold Schwarzenegger have been at odds for months over to fix the budget gap.
