California: I, Like, Totally Owe You

For only the second time since the Great Depression, California prints IOUs as the governor declares a fiscal emergency

By Marie C. Baca and Cheryl Hurd
|  Thursday, Jul 2, 2009  |  Updated 5:43 PM PDT
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California Prints IOUs

The State of California issued billions of dollars worth of IOUs today.

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California Prints IOUs

For the first time in 17 years, California is issuing promissory notes rather than paying cash.
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Click here to listen to the Governor's press conference on the state budget.

This afternoon, the State of California printed $53 million of dollars in IOUs in an effort to address a multi-billion budget deficit. It is the first time since 1992, and only the second time since the Great Depression, that the state has issued IOUs.   

Jacob Roper, deputy press secretary for controller John Chiang, said that 28,000 IOUs--also called registered warrants-- will be sent out today, with an additional 22,000 being sent out tomorrow. Most of the warrants will be sent to taxpayers, while others will go to small businesses and social service programs.

The move reflects both the government's troubled cash flow and its inability to agree on how to close the $26.3 billion budget gap. Gov. Arnold Schwarzenegger declared a fiscal state of emergency this week, giving the Legislature 45 days to come up with a budget. 

A panel this morning voted to set the interest rate on the IOUs at 3.75 percent. The state will pay interest up to the time they are cashed on warrants that are redeemed before October 2.

Meanwhile, state employees are being asked to take a third furlough day each month, bringing their total pay cut to 14 percent.   

Bank of America, Wells Fargo and Bank of the West have all said they will accept the IOUs through July 10.

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