Dear Taxpayer: IOU 2009 income tax refund. Love, California.
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California just can't get its act together. Today, amid a $27 billion budget deficit and political gridlock pitting Republican Gov. Arnold Schwarzenegger against the Democrat-controlled state legislature, Californian printing presses began rolling out the first of 29,000 I.O.U.'s intended as a to temporary patch for the state's debt.
The I.O.U.'s, or warrants, total nearly $53 million, and will be used to pay income tax refunds, a few local governments and some vendors working with the state. The warrants cannot be used to pay state employees, schools or Medicaid recipients.
Recipients may cash the warrants at a willing bank or credit union, or wait until their Oct. 2 maturity date, when they can collect an additional 3.75 percent interest.
Bank of America, Wells Fargo, and Chase have agreed to accept the warrants, only until the middle of the month, but the possibility of other banks stepping up looks grim, a consequence of California's abysmal debt.
“Given the poor credit rating of California – the worst in the nation – banks may be hesitant to extend credit to the state," said Rod Brown, president of the California Bankers Association, in a press release.
California lawmakers resorted to issuing the IOU's after the governor and state legislature were unable to reach a compromise over closing the budget gap. Gov. Schwarzenegger declared a state of fiscal emergency on Wednesday and ordered state workers to take a third furlough each month.
In order to further remedy the budget deficit;, the governor has proposed vast cuts to social programs, while simultaneously refusing to sign any increase in taxes or agree to any measure unless it solves the entire budget crisis in one sweep.
He blamed state Democrats for "putting the concerns of their labor supporters ahead of the state," as reported in the San Jose Mercury News.
I think that this is one of the examples of politics at its worst. The fact that important, impacting social programs are being cut before taxes are increased is appalling. It should be the other way around.
