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NEW YORK: California will have enough cash to stop issuing IOUs on Sept. 4, almost one month earlier than expected, the state controller said Thursday. That’s also the date when people and companies can redeem their IOUs with the state treasurer.The controller’s office has issued 327,000 IOUs worth a total of 1.95 billion so far. The Golden State was forced to start handing out IOUs on July 2 after Gov. Arnold Schwarzenegger and lawmakers failed to close a 24 billion budget deficit. Controller John Chiang had to start issuing the vouchers so the state would have enough money to cover debt payments and fund education. It was the first time the state issued IOUs since 1992, though it did delay payments in February during another cash crunch.Even after the governor signed a budget agreement in late July, the controller’s office had to determine when there’d be enough money in the state coffers to end the IOU issuance. Since the budget was signed, Chiang has issued 100,000 IOUs totaling more than 800 million.”Along with short-term loans that are routinely obtained in the fall, this spending plan should provide sufficient cash to meet all of California’s payment obligations through the fiscal year,” Chiang said.The IOUs were sent to the state’s vendors, county social service agencies and residents expecting tax refunds. The state’s biggest banks accepted them until July 10, but then most cut them off, hoping to bring lawmakers and the governors to the negotiating table. They were told they could redeem the paper on Oct. 2 or when the state had enough money in the bank, whichever came first. They will be paid an annual interest rate of 3.75%.California still isn’t out of its hole: The state will need to borrow 10.5 billion to meet California’s cash needs for the fiscal year, Chiang said. Ending the IOUs on Sept. 4 is contingent on the state obtaining a 1.5 billion loan by Aug. 28, which the state treasurer assured the controller will happen.

Source:CNN

SAN FRANCISCO (Reuters) — California Assembly Speaker Karen Bass said Wednesday she sees stalled negotiations with Gov. Arnold Schwarzenegger over closing the state’s 26.3 billion budget gap resuming by Friday. California has been burning through its cash without a budget agreement and is issuing IOUs for tax refunds. The legislature is being urged to consider taxing marijuana to help raise revenues. Bass, a Democrat, and Schwarzenegger, a Republican, have been at odds in recent days over his demands for overhauling some state operations with new rules, including some to root out and prevent fraud in the state’s welfare system, as part of a broader agreement for balancing the state’s budget.0:00
/2:26States face budget disasters”The problems are with the reforms, and I hate to call them reforms because they are really just policy concerns the governor has had for the past few years, that they are just too massive,” Bass told Reuters in a telephone interview. But Bass said she is hopeful budget talks would resume by Friday. “There’s some wiggle room,” she said. “I do see us back at the negotiation table in the next day or two.” State Senate Republican Leader Dennis Hollingsworth said lawmakers from both parties would welcome budget talks resuming as soon as possible. “There’s not a lot of movement,” Hollingsworth said of the day’s business in the state capital of Sacramento. Burning through cash. Without a budget agreement, California is going through its cash while suffering its worst slump in personal income tax revenues since the Great Depression because of the recession, rising unemployment and the housing downturn. The state’s cash crunch has grown so severe the state controller is issuing “IOUs” promising payment for tax refunds and vendors in order to have money available to pay priority bills such as payments to debt holders. One option open to the government of the most populous U.S. state for raising revenue is to tax marijuana, said retiree Nadene Herndon, a 58-year-old retire in Fair Oaks, California. Herdon promotes a tax on pot in a television commercial, paid for by the Marijuana Policy Project Foundation, that began airing on Wednesday in some California broadcast markets. “I’m a medical marijuana user, but I bake with it. I had several strokes several years ago and have left-sided weakness when I get fatigued … It helps late at night when I can’t get to sleep,” she told Reuters by telephone. Pointing to cigarette smokers, who light up regardless of California’s stiff tax on tobacco, Herndon said marijuana could prove a steady source of revenue for the state. “It should be taxed like any other commodity,” she said.

Source:CNN