SAN FRANCISCO -- California appears no closer to solving its cash and budget crises this morning, following the defeat of a stopgap plan that would have bought time before a liquidity crunch emerged.
With State Controller John Chiang announcing that the state’s imminent cash shortage will require him to begin issuing IOUs next Thursday to the state’s lower-priority creditors, state Assembly members joined ranks behind a bipartisan plan to defer about $5 billion in state spending in July. Chiang said the plan was good enough to avoid putting the state in a position of issuing IOUs next week.
But Gov. Arnold Schwarzenegger criticized the plan, saying he wanted a complete budget solution, and Senate Republicans refused to vote for the bills to enact the plan yesterday, denying them the two-thirds margin they would have required for urgency bills that take effect immediately.
The IOUs -- officially registered warrants -- would be issued to vendors, local governments, and taxpayers owed refunds in order to preserve cash for constitutionally and legally projected creditors, including K-12 schools, bondholders, and the state payroll.