California to pay its debts with I.O.U.S

Press, 19 February 1983, Page 21

California to pay its debts with I.O.U.S

NZPASacramento, California State workers, businesses, and disgruntled taxpayers owed refunds will be paid in 1.0.U.s because the governor and lawmakers are still bickering over how to meet a $1.5 billion budget deficit, California officials said. The state’s top fiscal officials said the delay in finding a solution to the deficit means the state would run out of cash on February 23, and will begin paying its bill in 1.0.U.S or registered warrants for the first time since the Depression. The 1.0.U.s are registered warrants — cheques that cannot be cashed until the state has the money, perhaps weeks after issue. The State Treasurer, Mr Jesse Unruh, said it would take 10 days from a settlement for him to borrow money from private banks to tide the state oyer, so that even an almost immediate solution would mean issuing LO.U.sinto early March. However, welfare grants to about 31,000 families in Sacramento County will be paid in cash on March 1, even if the state paid the county in registered warrants, Sacramento County officials said. The state's billion dollar budget for the fiscal year that ends on June 30 was balanced when passed last June. It ran into trouble later in the year as the recession caused drops in the sales and income tax revenues which account for 70. per cent of revenues. The legislature has failed since early December to agree on how to deal with the deficit, with the Demo-

crats who control both houses preferring tax increases and Republicans urging big spending cuts.

Mr Unruh said the banks had been helping the state through its fiscal woes so far, “but no one in the financial community is willing to give the state a blank cheque secured by nothing more than a hope that action from our Statehouse is forthcoming.”

The first 1.0.U.s would go to 75,000 Californians for income tax refunds and to 10,000 businesses which have sold goods to the state. After that, would go out to 86,000 state em-

ployees, plus another 10,000 businesses and 75,000 taxpayers a day, officials said. Up to eight million income tax payers could get 1.0.U.s instead of regular cheques for their refunds, averaging $250. The state Franchise Tax Board, which collects income taxes, was getting 2000 telephone calls a day about the 1.0.U.s said a board spokesman, Mr Will Bush. The 1.0.U.S would pay 5 per cent interest, but only a few banks and credit unions, mostly those with many state employees as customers, have said they would cash the warrants.