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Should California Get a Bailout?
As some readers might recall, without budget solutions from the Governor and Legislature, the California State Controller was forced to issue IOUs to several State payees last July in order to prevent a $2.8 billion cash shortage.
IOUs began printing July 2, and ended September 3 of last year.
The California State Treasurer began redeeming the IOUs September 4, 2009, and sent out more than 89,000 letters to remind holders of IOUs of the redemption.
Each IOU accrued interest through September 3, 2009, but holders do not earn interest past that date. The letter includes redemption instructions and contact information for any IOU holders who have questions about the redemption process.
It is difficult to imagine why anyone holding these IOUs would delay their redemption, given the state’s worsening financial condition.
To usher in the New Year, California declared a state of fiscal emergency after facing shortfalls of $6.6 billion for the year. This adds to the previous declarations made in 2009.
But that’s by no means the full extent of the state’s deficit. Over the next 16 months, California faces a $20 billion deficit. I expect it to get much worse without radical cuts to the budget.
As you might realize, California has been struggling to close its budget gap for well over a year, using job furloughs, cutting healthcare to families in need and many other methods implemented to save the state money. But the furloughs were overturned in court battles.
Now state government employees have been told they will face a 5% wage cut across the board. And they will have to pay for more of their retirement plan.