Californ-I-O-U

The Golden State is issuing reserve warrants I.O.U.s (cause they are f'ckin broke) and hoping banks will accept them. Maybe. (Please?)

Its budget gap growing and its political process for addressing the gap unhinged, California will begin Thursday to pay vendors and taxpayers with i.o.u.’s, only the second time the state has adopted the emergency payment method since the Great Depression.

A state board will meet Thursday morning to set the interest rate for the i.o.u.’s — known officially as warrants — as well as their maturity date. By Thursday afternoon, state officials said, 28,742 warrants worth $53.3 million will be printed and readied for distribution.

The bulk of the warrants will be issued to Californians waiting their income tax refunds, though some will be issued to local governments as well as vendors doing business with the state. Federal and state laws prohibit paying state employees, schools, or Medicaid recipients with the warrants.

The issuance of i.o.u.’s comes after state lawmakers and Gov. Arnold Schwarzenegger failed to agree on how to close a state budget hole — now roughly $27 billion — by the end of the fiscal yearon Wednesday. The state is essentially too short on cash to pay its bills, and will continue to issue warrants — with potential long-term serious damage to the state’s credit rating — until the budget impasse is resolved.

In the meantime, Mr. Schwarzenegger, a Republican, has ordered state workers to take a third furlough day each month, beginning next Friday, to help stave off a further cash crisis in the state. On Wednesday, he proclaimed a fiscal emergency and called for a special session to continue the budget debate.

Vendors and state residents who receive warrants may take them to a bank or credit union that accepts them for cash, or hold on to them until their maturity date — which will probably be sometime in October — and get their cash plus the accrued interest.

I'll gladly pay you in 90 days. We're good for it!

Also, how long before we're at the point where all of California's state workers are simply payed in these warrants where they have to hope somebody will accept them so they can pay their bills...that is paid for the days they're not being required to work for free? And how many other states are going to go down this road and decide that furloughs are a great idea...we just won't pay them and expect them to work on furlough days or else!

California is once again is showing the nation how to do it. Way to go, Ahnold!

[UPDATE 9:57 PM] Via Digby, a list of who's gettin' paid, and who's not:

People who get California IOUs:

Grants to aged, blind or disabled persons
People needing temporary assistance for basic family needs
People in drug prevention, treatment, and recovery services
Persons with developmental disabilities
People in mental health treatment
Small Business Vendors

People California pays in cash:

University of California
Public Employees’ Retirement System
Legislators, legislative employees, and appointees
Judges
Department of Corrections
Health Care Services payments to Institutional Providers

Giving blind people I.O.U.'s while you pay the legislators that made this mess is just f'ckin mean, man. Mean.