California may run out of money by the end of July, but it will start issuing IOU's a week from today.
State Controller John Chiang says he will be forced to issue the "registered warrants—also known as IOUs" starting July 2 unless an immediate budget solution is passed quickly.
Chiang issued IOUs during the last fiscal crisis back in February, but he says the shortfall this time is five times greater, and the governor has shut off going to Wall Street "to pursue short-term, high cost loans." Chiang says the state will have a $2.8 billion cash shortage by the end of July which will grow to $6.5 billion in September, "and after that we see a double-digit freefall." spacer
Legally protected payments will continue, but all other general fund payments will be paid in IOUs.
"These include payments to local governments for social services, private contractors, state vendors, income and corporate tax refunds, and payments for State operations including legislative per diem."
That means the very legislators now in session to solve this crisis will soon no longer be paid extra expenses for being away from home.
The controller, a Democrat, has not tipped his hand on what sort of solution he'd like to see. He just wants a solution. "Resorting to IOUs sends a signal that California has exhausted all other options to manage its cash flow."