California close to issuing IOUs - again

By Tami Luhby, senior writer


NEW YORK (CNNMoney.com) -- California is once again running out of money and may have to issue IOUs within a few weeks.

The state's financial crunch stems from the fact that it does not have a budget for the current fiscal year, which began July 1. The governor and lawmakers continue to squabble over how to close an estimated $19 billion shortfall.

State Controller John Chiang said Wednesday that the state could have to issue IOUs in two to four weeks to keep the state solvent. He estimates there are $2.2 billion in expenses -- mainly to social service agencies, vendors and schools -- that will go unpaid in August.

"The failure to pass a timely budget remains the biggest threat to California's finances," said Chiang last week, after issuing a report showing July tax revenues came in 1.9% below estimates.

California is the only state that is late in passing its fiscal 2011 budget.

California is no stranger to IOUs. A budget crunch last year forced the state to issue 450,000 IOUs worth $2.6 billion between July 2 and Sept. 4.

Gov. Arnold Schwarzenegger, however, did get some good news on Wednesday. The California Supreme Court overturned a lower court ruling that temporarily blocked the state from imposing a new slew of furloughs on government workers. The state's Supreme Court will hear oral arguments on the matter on Sept. 8.

Workers will now take off this Friday and next Friday, as well as one floating day this month. More than 150,000 state employees then will have to take off three days a month until the budget is passed, unless the court rules otherwise. It is expected to save the state $147.2 million a month.

"The furloughs are a direct result of the legislature's failure to pass a budget, which is causing the state to run out of cash and face IOUs this month," said Rachel Arrezola, a spokeswoman for the governor. "This is not an action the governor wants to take, but he must ensure the state continues to function and can pay its bills."

The governor is also trying to impose the minimum wage on state workers until a budget is passed. That effort remains tied up in the courts. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,083.80 -2.83 -0.02%
Nasdaq 4,472.11 -1.59 -0.04%
S&P 500 1,987.98 0.97 0.05%
Treasuries 2.51 0.04 1.83%
Data as of 6:59pm ET
Company Price Change % Change
Facebook Inc 74.98 3.69 5.18%
Ford Motor Co 17.84 0.06 0.34%
Yahoo! Inc 36.17 1.46 4.21%
Bank of America Corp... 15.62 0.10 0.64%
Apple Inc 97.03 -0.16 -0.16%
Data as of 4:02pm ET

Sections

Would you pay $7.76 for a Big Mac? The Economist's iconic Big Mac index is a lighthearted way to compare currencies and buying power around the world. More

The government says health insurers are charging lower premiums, thanks to a provision in Obamacare. More

In New York City, business travelers have ditched meals at Starbucks in favor of Seamless takeout, according to a new report. More

Chinese buyers are now the biggest international players in the U.S. housing market and some states are seeing billions of dollars in real estate deals as a result. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.