[W]ithout a budget patch in place by the end of this month, state finance officials say there's a chance state government might have to do what it hasn't done in 17 years: issue IOUs instead of paying its bills.
Until a budget is in place, the state can't borrow money.
Instead, the controller's office is forced to delay payments to various creditors. The decisions on who gets paid and who doesn't are determined in part by the state constitution (schools and bondholders get paid first); in part by federal law (state employees can't be paid in IOUs), and in part by any court edict that has ordered the state to pay someone.
Everyone else – companies that do business with the state, students who get state aid, local governments, taxpayers awaiting refunds – has to wait.
[T]he major banks and Wall Street investors that California usually borrows from have been so battered by the worldwide recession that just having a budget in place isn't good enough for them to lend the state money: they want it balanced, too.
State Controller John Chiang has forecast that absent a budget deal that allows borrowing, the state will be in the red by July 28.
The last time the state issued registered warrants – and the only time since the Great Depression – was 1992, when the state handed out 1.6 million warrants worth a total of $3.8 billion over a two-month period.
State financial officers say that issuing registered warrants would make it even harder to borrow from commercial markets and private investors – and nearly impossible without a balanced budget in place.
Monday, June 15, 2009
Do you want butter on your popcorn?
From the Sac Bee: