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California Still Issuing IOUs, But 'End is Near'

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Photo by: scazon
California Flag

Three weeks after reaching a budget deal, California is still short on money. It's still issuing IOUs.

The State Controllers Office says that from July 2 through August 7, $1,862,358,782.85 in so-called "registered warrants" have been issued by California in lieu of cash.

Of that amount, $369 million has been sent out in August.

"While we have a new budget, that does not mean our Treasury instantly fills with cash," Controller John Chiang said in a statement. "My office has been working around the clock, in partnership with the Department of Finance and the State Treasurer, to determine exactly how the new budget remedies the recent cash crisis."

Reading through the state's financial statementis a bit like reading a GM earnings report. Ouch.

On the one hand, some things are looking much better. Sales taxes were up 21 percent from a year ago, due in part to a one percent sales tax hike which kicked in last spring. The Controller also credits "Cash for Clunkers" for boosting sales taxes and car registration fees last month. But even corporate taxes were up nine percent! Total revenues for the state in July were $4.7 billion, about $360 million more than estimated, and about the same as revenues from a year ago. But disbursements totaled $9.4 billion (a half billion bucks more than July 2008), for a $4.6 billion deficit. And while personal income taxes were only about $80 million less than a year ago, the Controller points out that the state also issued $254 million in personal income tax refunds through IOUs in July.

A lot of numbers, I know.

But here are a couple I liked: Californians are smoking and drinking as much, as cigarette and alcohol tax receipts were down significantly from a year ago. Tax something enough and you will change habits. What will governments do when people stop smoking altogether? Ah, the fat tax. People who stop smoking will start eating.

On CNBC.com now:

The bigger changes in California's finances are seen on the spending side. Spending on state operations fell nearly 75 percent-prison spending was down 33 percent from a year ago, state health services down 49 percent, the University of California system down 91 percent. But local assistance spending was up 80 percent-more than doubling for K-12 spending, tripling for the community college system, with nearly that same increase for local mental health assistance.

Still, the overall picture remains bleak. But even as the President Pro Tem of the State Senate is suing Governor Schwarzenegger over line item cuts he made in the budget deal, and even as the IOU printing machines have yet to be moth-balled, Controller Chiang spoke the first words of optimism in a long time about California's economy. "There are signs that many sectors are nearing a bottom," he writes. "We are not ready to signal the beginning of the recovery in California yet, but there are many signs that the State is feeling for a bottom and that the end is near."

Questions? Comments? Funny Stories? Email funnybusiness@cnbc.com

  • Based in Los Angeles, Jane Wells is a CNBC business news reporter and also writes the Funny Business blog for CNBC.com.

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