California May Issue IOUs Again If Budget Not Fixed
January 23rd, 2010Via: Bloomberg:
California Controller John Chiang said he may have to use IOUs for the second year in a row to pay some government bills unless politicians close the $20 billion budget deficit facing the most-populous U.S. state.
Chiang, the elected Democrat who pays the government’s expenses, said in a letter to Governor Arnold Schwarzenegger and legislative leaders today that California faces another potential “cash crisis” in July if lawmakers can’t reach a budget agreement before the fiscal year ends June 30. By July 29, California will have $1.1 billion less than it needs to pay its bills should lawmakers stall, he said.
“If solutions are slow to emerge and if they are neither credible nor sustainable, California will once again be unable to timely meet all of its payment obligations and my office will be forced to seek costly emergency financing, or conserve cash by delaying payments or issuing IOUs,” Chiang wrote.
The state issued $2.6 billion of the vouchers last year to pay bills, resorting to promissory notes instead of cash for the second time since the Great Depression as Schwarzenegger and the Legislature were deadlocked over how to close an imbalance that totaled $26 billion at the time. The tactic allowed it to preserve cash for the highest-priority bills, including payments to bondholders, until an accord was reached and the state was able to sell debt to generate funds.
