California casts about for cash

Press, 10 February 1983, Page 7

California casts about for cash

NZPA-Reuter Sacramento California, once the most prosperous American state, is so short of money that by later this month it may not be able to pay its employees or give taxpayers the refunds they are owed, according to state leaders. The Controller. Mr Ken Cory, who supervises California's finances, said yesterday that there was an 80 to 90 per cent chance that the stale would run out of money by February 23. California was preparing to issue registered warrants, or "1.0.U.5,” to state employees in place of their wages and to people awaiting refunds on state taxes that they had paid during the last year. State officials said that the warrants would become payable later in the year and supermarkets and department stores might be willing to accept them immediately as payment.

The financial crisis in California. the most populous American state with 25 million inhabitants, began in 1978 when state taxpayers voted themselves a $7 billion cut in property taxes. The United States recession and a local unemployment rate of 11.1 per cent have also eaten into state finances. The state’s new Governor, Mr George Deukmejian. a Republican, proposed solving the present state Budget deficit of at least $1.5 billion by immediate spending cuts and by a book-keeping move — transferring half of the debt to the next financial year, which will begin on July 1. But efforts in the State Legislature to agree on measures to find a way out of the financial crisis have collapsed. Mr Deukmejian said that he hoped to resolve the crisis without using “1.0.U.5.” But the state would have no alternative if action was not taken immediately, he said.

Mr Deukmejian. who said in his Budget speech to the Legislature last month, “the bad news is were broke." also wants to borrow as much as $9OO million from

special state accounts and bankers.

But Mr Cory, a Democrat, said that bankers would not lend money to California until they knew how the state intended to resolve its budget deficit. The cash crisis has come as a shock to the millions of Americans who moved west after the Second World War to enjoy the warm weather and the highest level of prosperity in the United States. Between 1950 and 1980, California’s population rose almost 150 per cent to 23 million. But the recession has hit not only housing, manufacturing, agriculture, and mining. but also aerospace, defence and high technology, once considered to be reces-sion-proof industries.