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New York warns it may have to pay bills with IOUs

June 10, 2010 |  5:10 pm

Once again, the Empire State finds itself looking to copy Golden State style.

From Reuters:

Cash-poor New York state might have to pay its bills with IOUs next week to avoid the "anarchy in the streets" that could result from a government shutdown, Gov. David Paterson said on Thursday.

Like California, which last year issued $2.6 billion of IOUs during a lengthy budget battle, New York might have to pay its bills this way for the first time since the 1980s because the legislature has not enacted a $135 billion budget more than two months after the deadline.

California embarrassed itself last summer by resorting to IOUs to pay tax refunds, vendor bills and other expenses as cash ran low while the Legislature and Gov. Arnold Schwarzenegger fought over how to balance the budget.

This year, Republicans and Democrats in Sacramento remain far apart on a budget for the new fiscal year, and Schwarzenegger is once again talking tough. But Controller John Chiang, who made the decision to issue IOUs last summer, said last week that he expected to have enough cash on hand to pay the bills this summer, avoiding the need for another round of IOUs.

So for now, they're all yours, New York.

On Thursday Chiang had more good news: His tally of the state’s tax receipts in May showed that General Fund revenues were $592 million higher than expected, boosted by sharp jumps in personal and corporate income taxes.

“Despite the fact that many risks remain for California, these are nonetheless positive signs,” Chiang said in the May financial report. “The state is definitely on the road to recovery, albeit a long and arduous one as the economy regains its footing.”

But with the state still facing a yawning budget gap for the new year, he warned that “the financial problems before the Legislature and Governor remain just as daunting and time-sensitive as they did a month ago.”

-- Tom Petruno