State income tax receipts continued to plunge in June [Updated]

State income tax receipts continued to plunge in June, coming in nearly $1 billion lower than the already dismal projections made by California finance officials only a month before, according to State Controller John Chiang.

The drop in revenue adds to the state’s $26.3-billion deficit and comes as Chiang’s office is already issuing IOUs to state vendors and others because California lacks adequate cash.

“Our major sources of revenue have continued their trend downward,” Chiang said in a statement Friday.

His office is issuing IOUs in lieu of certain payments not given priority under state law, such as bills submitted by vendors, some welfare aid and student grants. But the controller said that if lawmakers and the governor fail to close the deficit by the end of September, he will be forced to stop making some of the protected payments.

Those include money owed to schools and paying off the state’s bond debt.

Updated 6:49 p.m.: Some banks stopped cashing California IOUs on Friday. But Citi said it would redeem them for one more week and Bank of the West said it would take them indefinitely.

-- Evan Halper reporting from Sacramento