With a new fiscal year about to begin Wednesday, and hamstrung by a still-unbalanced budget and a continuing cash shortage, California State Controller John Chiang said he will have to issue IOUs starting July 2 if immediate solutions aren’t quickly adopted.
“Next Wednesday, we start a fiscal year with a massively unbalanced spending plan and a cash shortfall not seen since the Great Depression,” Chiang said.
The IOUs would be issued for all general fund payments other than those categories protected by the state constitution, federal law and court decisions.
Affected would be payments to local governments for social services, private contractors, state vendors, income and corporate tax refunds and payments for state operations including legislative per diems, Chiang said in a press release.
The action would spread the state’s fiscal pain, which is the result of the Democrats out of control spending, to its constituents.
“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 free fall. Unfortunately, the state’s inability to balance its checkbook will now mean short-changing taxpayers, local governments and small businesses,” Chiang said.
The state also is staring at a $24 billion budget deficit which the Democrats want to solve by raising taxes. They can not understand the concept of cut spending. On Wednesday, Democrats proposed levying a 9.9% tax on oil production, a $1.50-a-pack boost in the cigarette tax and a $15-per-vehicle registration fee.
“In addition to the burden on those who receive the notes, resorting to IOUs sends a signal that California has exhausted all other options to manage its cash flow,” Chiang said.