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alstry (< 20)

Who needs money????? .....when you got a pen.



June 24, 2009 – Comments (6)

State controller John Chiang warned today that if legislators and Gov. Arnold Schwarzenegger fail to come up with a budget-balancing package in the next week, he would begin paying California's bills with IOUs on July 2.

The controller's warning came as legislators began what many on both sides of the aisle acknowledged was a rhetorical song-and-dance over closing a $24 billion deficit that stretches over the fiscal year that ends Tuesday and the one that begins Wednesday.....

"Next Wednesday we start a massively unbalanced spending plan and a cash shortfall not seen since the Great Depression," Chiang said in a news release. "The state's $2.8 billion cash shortage in July grows to $6.5 billion in September, and after that we see a double-digit freefall."

Resorting to IOUs -- whose technical name is registered warrants -- would mark only the second time since the 1930s that California has paid its bills that way. The last time was 1992.

Chiang and other state officials had said that the state would first probably resort to delaying payments to vendors, local governments and others of the state's creditors while a budget balancing deal was worked out so the state could borrow money from Wall Street for its cash flow problems.

Both borrowing for cash flow and delaying payments are commonplace. In fact, Chiang delayed payments in February for 30 days while legislators and the governor wrestled with a budget deficit.

But, Chiang said said, the current cash shortfall was five times larger than the February hole. Since Gov. Schwarzenegger said last month he would not authorize a form of short-term borrowing through what are called revenue anticipation warrants, Chiang said IOUs were the only option.

A federal court ruled in 1996 that state employees couldn't be paid with IOUs. Others who receive them will draw interest on them, but banks and other financial institutions can refuse to accept them. Chiang said the IOUs would have a maturity date of Oct. 1

Could you imagine paying your tax returns this way??????

6 Comments – Post Your Own

#1) On June 24, 2009 at 8:13 PM, dickseacup (< 20) wrote:

Does it make sense to issue warrants that pay interest when you don't have the money to pay the bill in the first place?

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#2) On June 24, 2009 at 8:50 PM, Varchild2008 (84.02) wrote:

"Dumb and Dumber" Movie quote:  "Don't worry, IOUs are just as good as money!"

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#3) On June 24, 2009 at 9:00 PM, AdirondackFund (< 20) wrote:

Revenue Anticipation Notes/Warrants were issued by New York City when it went Bankrupt in the 70's.  The famous "Gerald Ford tells NYC to drop dead" headline on The Daily News was really quite something at the time.  Funny how soon we forget.

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#4) On June 24, 2009 at 9:28 PM, alstry (< 20) wrote:


Rolling Stone has an expose on GS.....Buffett doesn't see any green shoots.......California is out of money......

How will the people react when they wake up one morning and realize there is no money.....anywhere???

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#5) On June 24, 2009 at 9:52 PM, AdirondackFund (< 20) wrote:

I don't know Alstry.  I'm still scratching my head about today. 

I have planned by buying a Tree Farm, moving to the country, where I have 3 fresh out of the ground springs and a stream that runs for a mile and a half through the center of the property with a 300 foot gorge that produces hydroelectricity.  Other than that, I have no plans.

Here's the best part, and this might make you laugh.  There are Bears on the property.  They leave me big 'piles' to announce their presence and always do this after I have been there working in a certain area of the land.  It's actually pretty funny.  These things are 350 lb. monkeys and climb trees and the rest.  They run faster than the wind without effort. It is good for a man to be reminded of the time and the season in which he lives, and of which kind of predators might be out and about on his land.    

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#6) On June 24, 2009 at 11:24 PM, oshiri (< 20) wrote:

Damn you Alstry!

Why didn't you warn before June 15th?  And here I paid my Cal-ee-forn-yah estimated quarterly taxes by check. Stupid, stupid Oshiri, shoulda used my yellow pad.

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