State provides details on how the IOUs will work

As California prepares to issue IOUs to pay many of its bills, Controller John Chiang's website has posted answers to 26 questions about the scrip, formally known as registered warrants.

A few key points upfront: The state won’t doesn't have to redeem the IOUs before Oct. 2, and even that will be dependent on its cash situation; you may be able to redeem the IOUs at a bank before Oct. 2, but it’s up to individual banks whether they’ll take the scrip; the warrants will accrue tax-free interest on the amount owed at a 3.75% annualized rate.

So far, Bank of America and Wells Fargo say they will redeem the IOUs from their customers, but only through July 10.

State retirees as well as people receiving unemployment and disability insurance benefits will get their normal checks, not IOUs.

If the state has sufficient cash on hand, it could begin redeeming the IOUs before October.

Note: The Oct. 2 maturity date was just determined today; Chiang's website may still show Oct. 1 as the date, but that will be updated.

Read Chiang's full Q&A on the IOUs.

-- Tom Petruno

Comments

[steve]

Without question the worst governor in the history of California. He can't seem to get anything done, expect go to GOP fund raising events.

[aaron]

Yea the worse California govenor ever, couple with the worst President ever. George Bush who left office, after knowing his elite cronies made billions and left our country bankrupt!

[MethodMan]

Gee, you mean we just can't spend spend spend forever and not run out of federally-printed money? Who's been in control of the state legislature for the past 20 years?

California needs to charter a bank, issue gold, silver or commodity-backed currency, and tell the federal government to take a hike, for they've taken our resident's tax revenue to bailout New York financial firms, who helped create this lovely mess in the first place.

They have favored the commerce of one state over that of our own, which is in violation of the Constitution. The state needs to sue, and stand up for its sovereignty.

[bruce]

as a public service, here i am to solve the budget crisis in just a couple of minutes:

1. eliminate public employee unions, and put all public hiring on a competitive, meritocratic basis.
2. fire all the spokespeople, public relations people, diversity commissars, and all consultants except for information technology.
3. eliminate one house of the legislature and make the other part-time.
4. make public employee retirement defined-contribution, stand-alone and require it to pay out no more than it takes in.
5. cut the administration budgets for all education from kindergarten to uc by at least 50%, and eliminate tenure for k-12.
6. repatriate illegal aliens who commit new crimes here, and eliminate the sanctuary concept. if necessary, march them back across the border at gunpoint.
7. legalize and tax marijuana, and release all non-violent drug criminals from confinement.

you're welcome!

[Independent skeptic]

Yes, it's all Arnold's fault. I mean, when he made those Terminator movies, he was the reason CA spent more than it took in and continued to do so for the prior 15 years he was elected.

You Democrats need to stop thinking like Democrats and realize it's your guys that created the budget mess we're in. Arnold was too concerned with being popular than doing the right thing and as a result, went along with this stupidity, and in some ways contributed to it.

Pull your heads out.

[gorefan]

Can anyone explain how a California bankruptcy might work? Will it go through the normal bankruptcy court? Will a judge then be able to end union contracts, change retirement benefits, cancel bond payments or raise fees (DMV or park entrance fees)/ Could he dismiss the governor or legislature? Or would he be able to raise taxes?

[Tom Petruno]

@ gorefan: States cannot file for bankruptcy. There is no provision in the law to allow for that. Cities and counties can file for bankruptcy, but states cannot.

Tom Petruno

[Gorefan]

Thanks Tom - so what happens on the Oct 2nd if the state cannot pay for the IOU's. Issue more IOU's?

[randy]

Leave it to the LA Times to twist the news, as a pawn of the Democratic Party leadership, yet again... did you see their budget calculator?

http://www.latimes.com/news/local/la-statebudget-fl-2,0,6957202.htmlstory

Some of the writers at the LA Times should consider careers as novelists.

Put a monetary number to those items that "Bruce" has cited above and I'm sure that the budget CAN be balanced WITHOUT removing socials services. It's time for the politicos to crawl out of the bed they've been sharing with the public unions, wash yourselves of the guilt and betrayal to the tax paying citizens that support this state's financial infrastructure and solve the problem. The solution is clearly not going to be new revenue streams placed on the shoulders of the already over-burdened tax paying people of this state.
It's a spending problem and has been a spending problem for 10 years. Stop putting a gun to our heads in the form of reduced social services in an attempt to reverse voter imposed will: Prop 13 and the 2/3 rule are here to stay. Get over it and solve the problem.

Bruce.... you have my vote! "Put it on the table".

[James]

Why does everyone blame the Governor? Then they also blame Bush? First of all Arnold is no true Republican just like McCain isn't a true Republican. Bush spent 8 Trillion in 8 years! Obama already planned a budget of almost 4 Trillion in a few months in office? WTF?

Back to Californias problems, you must do the following. Stop services to illegals and revolk Prop 13. Schools, Hospitals, and Jails are sucking money thanks to illegals. People who owned homes for 20+ years are paying a fraction in property taxes as their neighbors who bought in the past few years. Prop 13 is a ponz scheme. Early home owners benifit from new home owners. New home owners subsidize the earlier home owners by paying more in prop taxes.

[gerrrg]

No offense, but I seriously doubt this is the making of the Guv alone. All I read throughout the articles from different publishers, are people blaming the Guv. A lot of people voted down cuts at the same time as tax increases, not just at the ballot box, but also in the Legislature.

There is no widespread desire to share the blame nor share the deficit, so the blame game becomes the standard response from the people to the government. It won't matter what happens, any solution will guarantee to result in very few people being satisfied.

[p.o.w.]

whenever you guys are ready to start leading, and get off the computer let me know

[Robert T. Green]

Remember back in the summer of 2001 when Enron and the like robbed California citizens of billions of dollars in fake charges and President Bush got on TV saying it was due to California's poor mamagement? Business are inherently evil and will continue to crush the people in order to make more profits (credit card scams, electricity, water, health, food, etc). Stop allowing businesses to enslave Americans and these money whoring games will cease!

[Josh]

Hey Republicans,

Please stop lying. Someone above claims Bush spent 8 trillion total in 8 years and Obama has spent half that in 4 months. At first glance, this is a total lie... I'm not going to go year by year, by FY 2008, the U.S. Budget was almost 3 trillion dollars.

If you are going to lie, what's the point? Do you want to win that badly? Just to win? Or do you want to fix the clear problems we have. First thing we have to do is be honest with ourselves.

To that end- we can't fix California's budget in a way that does not cause catastrophic pain without some combination of tax increases and spending cuts. Left or right, please just be HONEST!

The dishonesty on both sides is what is to blame.

[trudylou]

Perhaps California law makers can't govern because of the way the Constitution has organized them. The voters have voted on high services but then limited how the state can pay for them. Raise taxes and 48% has to go to education. It has the highest marginal rates but does not collect the most taxes because of loopholes and attempts only to tax the rich. Gerrymandered districts that cater to the extremes of each party. California needs a constitutional convention to reorganize itself in a way that works. Stop pointing fingers voters, and fix this mess. When budget items came up for the vote in may, turnout was only 26%. Didn't anybody care then? If Michigan can balance its budget in this economy, surely California has the wealth to do so as well. If you don't fix your constitution these problems will never be fixed and the deficit in the next recession will be even worse.

[Gorefan]

Tom - you said States cannot file for bankruptcy, and I understand from the Bankruptcy law that that is true. Only a municipalities as defined by the BK law are allowed to file. Bt the BK laws define a municipality as a "political subdivision or public agency or instrumentality of a State". Does that mean that individual parts of California (CalTrans, Dept. of Corrections, etc.) can file for bankruptcy Instead of one big bankruptcy could there be dozens of individual bankruptcies?

[Tom Petruno]

@gorefan: Interesting question. I don't believe the individual entities can file for BK, but I don't know for sure. I'll need to check this with some BK experts.

Tom Petruno

[Figgins]

First off, we can't stop giving services to illegals. The Courts and Feds have ruled that no one can be denied a free education, nor emergency medical care. I don't particularly like it, but no one chose me to be on the Court or elected me to office.
Second, taxing pot is not going to bring in more tax dollars. Do you think the smugglers will jump up and "Here I am!", or will it be more like Moonshiners and Revenue Agents? Add up all the costs to account for the "tax revenue" and any monies collected will be far offset by the cost of collection.
Third Prop 13 simply set the tax rate at 1% of the sale price. In a recession, there aren't as many homes sold, so fewer re-assessments are done. Tax rates don't change if the price declines (sure you can apply for a re-assessment, but then the State can re-assess again when it's to their favor and hit you with the new current market rate). Property tax revenue doesn't drop unless the homeowner bails (and we have seen a fair amount of that), but then the new owner starts paying. Better to get some tax than nothing at all.
Fourth, the 2/3 rule has been around since the Great Depression. Seems to work very well, except when the Democrats can't find enough money to spend on their pet programs. Then it becomes the bogeyman of State finances.
Fifth, all the initiatives that the voters have passed (with the exception of the Stem Cell Research boondoggle), are inadequate solutions to issues that were originally before the Legislature. If the Legislature had taken care of business, instead of running away to hide behind their Special Interest benefactors, the voter initiatives would not have had the impetus in the first place.
I ask you: if your spouse spent more than your entire paycheck every month, mortgaged your home to the hilt, and ran up all your credit cards, how long would it be before you took control of the checkbook?

[al]

Arnold does not give a rats behind wat happens to CA. He wanted to be president. BOO! HOO! The law did not change to allow NON -US BORN. So now out of spite, he is slapping the State in the face!

[Darren]

What this proves is we can't trust Republicans AND Democrats to run anything. They've proven time and again they can't run the Federal government properly, they can't run the State, they BOTH put us trillions in debt, they BOTH transfered the public's wealth to the wealthiest elite through "bailouts", they BOTH continue trillion $ wars, and hell, BOTH of them would fall flat on their ass managing a grocery store if given the chance. It's really disturbing and mind-boggling why Americans re-elect the (D)'s and (R)'s. If one thing doesn't work, try another. Don't try the same thing each time expecting a different result. You won't get that desired result. Just more lip-service from a power hungry politician.
And politicians aren't the only people to blame for this mess- the Californian voters through ballot measures, okayed a transit system linking Anaheim to San Fran worth $10 billion dollars and that doesn't even include maintenance costs, employee salaries and expansion costs worth billions more. It's so ridiculous even the Feds are now required to pick up the tab. Now, Californians, what made you think we could afford something like that when we were 46 BILLION DOLLARS IN DEBT at the time??
Now, the appropriate response to this fiscal mess is to dissolve the State government and shift.control to individual counties. From there, impliment the Fairtax system which bases its revenue solely on a sales tax. Abolish income taxes and slap pay restrictions on city employees by 18%.
We need a leader who is liberal/tolerant on social issues, pro-environment and fiscally responsible. Anything else- I'm certain will leave the State in perpetual ruin.

entitlement feeling, over- spending, irresponsible and total idiots when it comes to manage money.

[Dr.NosePikens]

Yes on A.B. 390 !!!! Save California State Employees Jobs!!!!
The next time you take a bite of that Mc Hamburger think about who’s inspecting that restaurant for roaches, rodents and other common vermin. They won’t have the staff to do as many inspections as usual so what use to be annual will become every 5 years or 6 years and that’s a lot of unchecked rodent hair getting into our food. The Feds don’t inspect or have authority to inspect State food facilities. Dog pounds will cut the euthanasia waiting time over half which can be a problem if your pet gets out of the yard and picked up. You will have only 24 hours to claim your pet before it will have to be euthanize. City maintenance will cut their staff so soon those safety signs, lights and reflective paint on the roads will be a thing of the good old days. No the only State employees California will have left will be the politicians they elected who took it all away from them, right Arnold?

[Dr.NosePikens]

He won't support A.B.390 but he will close our parks, layoff CHP's, and other needed services that we the people of California have worked hard to put into place. We need to fire all the politicians in our State and start fresh with leaders who embrace the 21st century not those like the Governor who spends his hours scratching his head trying to figure out how he got into office! Have you ever noticed when he's talking about California's issues he compares them to his fatherland? Really listen to him next time, he's always answering reporters with this line "Oh yes but first I'd like to find out how their doing it in some of the other countries". Dang man what county are you basing your decisions for California on dude Haiti's? Here's an old Californian saying shist or get off the pot, sir.

[Aleksey]

When there's been a terrible car accident on a high way ... Do you see cops and ambulance stand around it and try to conjure up their theories on what happen and who's to blame for this accident, while the traffic builds up, and the people in the wreck are bleeding to death?

That's exactly what Sacramento is doing. They are swinging their penises around to show off who's got the bigger one.

Let's leave finger-pointing for the 3 year-olds, OK?! Let's get this moving, and then investigate the wreck and what happen and who to blame, OK?!

Frankly, I'm not a politician, So I wouldn't know how to fix this. But i just want those in Sacramento to put their tools back in their pants and have a seat at the table and solve the damn problem.

I don't understand how could this have happen! It's 2009! The best State in US and it's ... bankrupt?! Shame.

[Dick Ganzinia]

Where is Gray Davis when you need him !!!
Kalfournya will go under as soon as it figures out
what to do.