SAN FRANCISCO — Unless lawmakers act quickly to solve the state’s budget and cash crises, California is eight days away from issuing IOUs to many of its creditors, state Controller John Chiang announced this morning.
Without such action, Chiang said his office will begin issuing registered warrants on July 2 to private businesses, local governments, and owners of unclaimed property owed money by the state government, as well as taxpayers due income tax refunds.
The registered warrants are “promises to pay” such debts with interest, according to the controller’s office.
Chiang said they would be issued in order to preserve cash for payments prioritized by the state constitution and court rulings, to K-12 education, debt service, payroll, pensions, in-home supportive services, and Medi-Cal providers.
Registered warrants would be redeemed by the State Treasurer on Oct. 1 – assuming there is sufficient cash available.
Chiang made his announcement this morning as the state Assembly and Senate began debating a budget-balancing package proposed by the Democratic majorities in each house to resolve the $24 billion budget gap projected during fiscal 2010.
Gov. Arnold Schwarzenegger, a Republican, has criticized the Democrats’ package for failing to go far enough to meet the state’s deficit and imminent cash crisis, as well as the inclusion of about $2 billion in tax increases. Most observers don’t believe it will pass as proposed.
Chiang and state Treasurer Bill Lockyer have warned that a plausibly balanced budget is needed by June 30 in order for California to be able to get investor to buy cash-flow notes before the end of July, when the state’s cash position is projected to go negative.