California to Delay Tax Refunds; Cut Off Aid to Elderly, Blind and Disabled People
January 18th, 2009Via: Mercury News:
California’s budget meltdown is about to hit home for millions of taxpayers awaiting their refunds and people who depend on the social safety net to survive, a top state finance official warned Friday.
Controller John Chiang, who is responsible for managing the state’s cash flow, plans to delay $3.7 billion in payments starting next month in response to lawmakers’ failure to fix a projected $40 billion deficit through mid-2010.
Among those who won’t get paid on time: taxpayers who file their returns early and are awaiting refunds; families who depend on welfare and aid for the aged, blind and disabled; and programs that serve developmentally disabled and mentally ill patients.
“Delaying payments will hurt real families, many of whom are just hanging on in these very, very tight and difficult times,” Chiang said. “Taxpayers who expected to use their refunds to purchase a car, to make food payments, to pay off their credit card bills, will have to wait. That is something we should not be doing.”
In February 2008, the state issued more than 2.7 million tax refunds, averaging $724.
Many other bills will be paid. Chiang said his office still plans to cut checks next month to schools and universities, government employees, the state retirement system and Medi-Cal providers. The state also will make good on debt payments — a top priority, since defaulting on bonds would preclude the state from borrowing money in the future.
Altogether, the controller expects to disburse $6.6 billion in February.
To guard against unforeseen expenses, the state tries to maintain a $2.5 billion “cushion” in its bank account. But the state’s cash balance is on course to post a deficit of $346 million next month, Chiang said. Hence, the plan to withhold taxpayer refunds and payments for social services.
Chiang said he anticipated that delaying payments could get the state through February and March but that the situation could demand more drastic measures after that. One possibility would be to issue IOUs to businesses, taxpayers and others who receive state funds. But IOUs, which could be cashed out at banks that would then redeem them from the state, would carry potentially steep interest rates, and the controller declined to guess when he might have to resort to them.
Chiang said the February payments would be postponed at least 30 days and that only a budget deal in the next several days would cause him to change course.
Talks between Gov. Arnold Schwarzenegger and legislative leaders on a plan to balance the budget are continuing, but it is unclear whether they will reach an agreement by Feb. 1. The sides met Friday and are expected to huddle again today.
Also on Friday, a state panel that last month voted to freeze $4 billion for infrastructure projects such as roads and schools moved to free up about $650 million of that money. Officials said the cash is needed to pay some contractors for work already performed. No decision has been made yet on how the $650 million will be divided.
I have an online friend who is chronically ill (diabetes is the latest on her long list of serious diagnoses, but her main problem is severe lupus) and dependent on state-benefits in California. She’s not in the best of shape healthwise right now, and this may be the thing that does her in. All it takes a great deal of stress to make the symptoms of her condition into something life-threatening, after all.
Her health problems have been so bad that as much as I feel put upon by having to live in a society such as the USA, I have no choice but to realize how relatively good things have been for me when I think about her situation. Of course, how put upon she has been by the lack of a national health-care system and how viciously people treat her for being dependent on government-benefits haven’t exactly made me want to enthusiastically salute the ol’ Red, White, and Blue, either.