California may issue IOU's
Despite working into the night, California lawmakers failed to balance the state budget, which means IOU's may be issued in lieu of payments for the first time in nearly two decades. Sam Eaton reports.
California Gov. Arnold Schwarzenegger speaks on the status of the state budget at the California Center for the Arts in Escondido, Calif. (David McNew/Getty Images)
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TEXT OF STORY
STEVE CHIOTAKIS: California lawmakers worked into the night but failed to balance the state budget before today's start of the new fiscal year. That means IOU's could be issued in lieu of payments for the first time in nearly two decades. The latest from Marketplace's Sam Eaton.
SAM EATON: Unless lawmakers agree to new cuts in a special emergency session today, California could begin issuing more than $3 billion in IOU's as soon as Thursday. Contractors and local agencies serving the elderly, disabled and poor would be the main recipients. The move is a last-ditch effort by the state to avoid running out of cash entirely by the end of this month.
California's budget shortfall has swelled to nearly $25 billion as the state suffers the worst drop in income tax revenues since the Great Depression. Governor Arnold Schwarzenegger and Republican lawmakers have ruled out tax increases as a way to close the gap.
The state's economy is the world's eighth largest, accounting for 12 percent of the nation's Gross Domestic Product. Experts say if California stumbles, the recession plaguing the national economy could be prolonged.
In Los Angeles, I'm Sam Eaton for Marketplace.
Comments
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From San Jose, CA, 07/08/2009
Many residents of California have lost jobs, homes and used up savings. Banks refuse to modify home mortgages. Many people in California struggle to feed their families.
Management personnel working for the state should be worried. The state should get social security just like the rest of us. Now is a good time for a serious pay cut for management.
From fresno, CA, 07/06/2009
will my disabilty check be apart of the ca i o u
From Huntington Beach, CA, 07/01/2009
I am on disability and support a wife and child. Disability is our only income. From what I have been able to discover I do not know if my next disability (rent check) will be sent to me. I do not believe that my development will accept a State issued IOU! Can someone in the loop comment on this so that I, and many others, know what is going on?
Thank You.
From Tarzana, CA, 07/01/2009
In response to the two comments posted and for fair and balanced comments I would like to remind readers of the following two facts. The first is that Schwarzenegger sided with the Democrats and increased taxes already. The Republicans were told no more tax increases so that they would support the first tax increase. The second point is that state workers have already been told that they would receive IOU's also. The media chose to use the wording "elderly, disabled and poor" for the dramatic effect.
From marina, CA, 07/01/2009
So, instead of everyone paying a bit more taxes and an extra $15 for vehicle fees, Arnold wants to take vital money away from the people who are in the most danger of becoming homeless, dealing with illness and being unable to afford medications.
This is reprehensible. How can he do this to us? Why is it that the people who are the most vulnerable are bearing the brunt of this crisis -- can't *anyone* else spare a few bucks, so we won't have to become homeless or decide between medications? I am serious about this -- if people care, can those who are better off offer to give a bit more to the state so this does not happen? How would they go about this?
I just think that if you gave most people the choice, they would rather pay a little extra money each year than see elderly people shivering on the street. But no one is putting the question to them. How can we change that?
From los angeles, CA, 07/01/2009
My question is how do they expect people to be able to pay rent, pay bills or feed their familes; with the IOU's that they are planning on issuing. Also, I'm curious will state workers also be issued IOU's. The reason for this question is they say contractor's, elderly and disabled, and the poor would be the main reciepents of these IOU's. If this is going to happen I and many other's that I know feel that all the state workers should also recieve these IOU's to. Why is it the poor, elderly, disabled, and the children have to be the ones to suffer first?
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