InfoAnda - Controller: IOUs signal Calif fiscal mismanagement

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Yahoo! My Yahoo! Mail Yahoo! Search Search: Sign InNew User? Sign Up News Home - Help Navigation Primary Navigation Home Singapore Asia Pacific World Business Entertainment Sports Technology Top Stories Most Popular Secondary Navigation Africa Europe Latin America Middle East North America Search Search: Controller: IOUs signal Calif fiscal mismanagement By JUDY LIN,Associated Press Writer AP - Saturday, June 27 SACRAMENTO, Calif. - Thousands of Californians will be hurt and it will cost millions if the state is forced to hand out IOUs instead of payments next week, the state controller said Friday. The IOUs could come as soon as next Thursday, yet lawmakers remained no closer to a budget compromise. ADVERTISEMENT State Controller John Chiang (CHUNG) said Gov. Arnold Schwarzenegger and lawmakers need to come up with a complete solution to the state's $24.3 billion deficit instead of making a political statement. "Running the state off the cliff is no way to make a political point. I don't want shock and awe. I want permanent solutions," Chiang said. Democrats this week proposed to cut and delay billions in spending to prevent the IOUs _ without solving the whole shortfall. Republicans in the state Assembly voted for the package, but Senate Republicans rejected it and Schwarzenegger said he would veto it if it were approved. On Friday, Schwarzenegger ordered more than 200,000 state workers to take a third furlough day each month if no deal is reached by the end of the month. The furloughs would save the state about $420 million, and would follow two-day-a-month furloughs implemented by the governor in December. Yvonne Walker, president of 95,000-member Service Employees International Union Local 1000, called it "absolutely appalling" for the governor to further reduce employee pay. Without a new budget, Chiang said he would have to start issuing IOUs next Thursday. Students expecting college grants, disabled people and low-income seniors may not get paid if that happens. Vendors that provide services to the state and counties that run social service programs could also miss out on payments, and taxpayers would owe interest on the IOUs, Chiang said. Chiang, who acts as the state's accountant, said issuing IOUs will send creditors a message that the state is not able to manage its finances and would likely invite further credit downgrades. Fitch Ratings this week downgraded the state's general bond rating to "A-," from "A." "You don't want to say you can't pay your bills," Chiang said. The new fiscal year starts July 1, meaning an impending cash crisis is just days away. A Friday vote on a portion of the Democratic budget plan fell short of the necessary two-thirds support in the Assembly for the second time. And a vote on Democratic proposals to raise fees and accelerate revenues failed in the Senate. Lawmakers were scheduled to meet again Sunday, and Schwarzenegger said Friday he was prepared to work through the weekend. One Republican lawmaker proposed minimizing the effects of the cash crisis by allowing people who receive IOUs to use them as a credit toward taxes, fees and liens they owe the state. The bill by Assemblyman Joel Anderson, R-La Mesa, is before the Assembly's banking committee. The IOUs offer only a temporary fix to the state's cash flow. Even if California issues the warrants, the state will be $600 million in the red in September, according to the controller's office. The IOUs, also known as registered warrants, will look similar to a check but have the words "registered" printed on the front. If the state has enough cash in October, the state treasurer will pay the IOUs with interest. Some banks might cash IOUs early, depending on the interest rate the state offers, said Beth Mills, a spokeswoman for the California Bankers Association. A state board is expected to announce the interest rate July 2. Last summer, as budget negotiations held up payments, universities allowed students enroll in classes while waiting for the state to adopt a budget and provide money for college grants. The last time the state issued IOUs was during a protracted budget fight during the summer of 1992. Some banks initially honored the registered warrants but then started to decline cashing them as the stalemate dragged on. "It's a very dangerous game of chicken, and we're not playing it," said Senate President Pro Tem Darrell Steinberg, D-Sacramento. Email Story IM Story Printable View Blog This Sign in to recommend this article » 0 users recommend Related Articles: World Obama's Marines in position for Afghan offensiveAFP - Saturday, June 27 White House denies indefinite detention orderAFP - Saturday, June 27 Controller: IOUs signal Calif fiscal mismanagementAP - Saturday, June 27 Regulators shut 4 banks; 44 failures this yearAP - Saturday, June 27 Tainted SC governor tries to get back to businessAP - Saturday, June 27 Most Popular – World Viewed Pop icon Michael Jackson dead: TMZ.com website Botox helps Australian stroke victim to walk again Farrah Fawcett dead at 62: Ryan O'Neal Sarah Jessica Parker welcomes surrogate twins Egyptian tycoon to hang for Lebanese diva murder View Complete List » Search: Home Singapore Asia Pacific World Business Entertainment Sports Technology Top Stories Most Popular Copyright © 2009 Yahoo! Southeast Asia Pte Ltd. (Co. Reg. No. 199700735D). All Rights Reserved. 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