California Government Doles Out More IOUs

Another 12,500 IOUs were issued by California on Tuesday, as a way to make up for bills they were unable to pay. This decision brings the total number of California’s IOUs issued to over 72,000, and that number is only expected to rise. Check out the following clip from a new Sacramento Bee article discussing this disastrous situation below.

Last week's decision by state Controller John Chiang to issue "registered warrants" instead of checks to taxpayers owed refunds, vendors and other groups was the most dramatic step a state has taken this year to confront billions of dollars in budget shortfalls. A total of 72,000 IOUs have been written since last week.

Gov. Arnold Schwarzenegger, a Republican, and the Democratic-controlled Legislature have been unable to agree on a package of spending cuts and tax increases to close a massive budget gap.

The result is a standstill — and IOUs that reached a total of $109 million Tuesday.

California issued IOUs in 1992 during a 61-day budget impasse. Some states issued IOUs during the Great Depression. The notes, now worthless, can be bought at antique shops, says Chicago bankruptcy attorney James Spiotto, an expert in government finance. Spiotto says he doesn't know of any state other than California to issue IOUs since the Depression.

Continue reading this article, here.

CA may Issue IOUs for Tax Refunds

From ABCNews.com:

With the state budget crisis ongoing, the state's Controller says California may be forced to send out IOUs instead of refunds.

Hoping to get her state income tax refund as soon as possible, Akisha Marshall is getting a jump-start on her filing.

ABC7 asked her, "How much do you depend on your refund?"

"A lot. It's just like a job check," she said laughingly.

Last year 2.7 million people got their state refund in February totaling $2 billion. But, this single mom and other Californians may have to wait for their refund this year.

It is Day 61 of the state's budget stalemate and the state will run out of cash next month. It is at the point where the Controller will have to issue IOUs to pay the bills, including state tax refunds.

"An IOU is a registered warrant issued on behalf of the state's treasury that lets the individual receiving the IOU know that they will receive their funds at a later date," explained Jacob Roper with the State Controller's Office.

When asked, "How much later?" Roper replied, "We don't know."

State lawmakers just came back from a long holiday break to continue budget negotiations. Republicans still do not want to raise taxes and Democrats do not want deeper cuts to social programs.