California to end IOUs on Sept. 4

The Golden State has issued 327,000 IOUs totaling $1.95 billion since July 2 to preserve cash. State should have enough funds to see it through fiscal year.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all RSS FEEDS (close)
By Tami Luhby, senior writer

Where does your state rank?
Americans everywhere are feeling the recession's pain some more than others.
When do you believe you will drive an electric vehicle such as the GM Volt?
  • As soon as they're available
  • In the next 5 years
  • Sometime in the future
  • Never

NEW YORK ( -- California will have enough cash to stop issuing IOUs on Sept. 4, almost one month earlier than expected, the state controller said Thursday. That's also the date when people and companies can redeem their IOUs with the state treasurer.

The controller's office has issued 327,000 IOUs worth a total of $1.95 billion so far.

The Golden State was forced to start handing out IOUs on July 2 after Gov. Arnold Schwarzenegger and lawmakers failed to close a $24 billion budget deficit. Controller John Chiang had to start issuing the vouchers so the state would have enough money to cover debt payments and fund education. It was the first time the state issued IOUs since 1992, though it did delay payments in February during another cash crunch.

Even after the governor signed a budget agreement in late July, the controller's office had to determine when there'd be enough money in the state coffers to end the IOU issuance. Since the budget was signed, Chiang has issued 100,000 IOUs totaling more than $800 million.

"Along with short-term loans that are routinely obtained in the fall, this spending plan should provide sufficient cash to meet all of California's payment obligations through the fiscal year," Chiang said.

The IOUs were sent to the state's vendors, county social service agencies and residents expecting tax refunds. The state's biggest banks accepted them until July 10, but then most cut them off, hoping to bring lawmakers and the governors to the negotiating table.

They were told they could redeem the paper on Oct. 2 or when the state had enough money in the bank, whichever came first. They will be paid an annual interest rate of 3.75%.

California still isn't out of its hole: The state will need to borrow $10.5 billion to meet California's cash needs for the fiscal year, Chiang said. Ending the IOUs on Sept. 4 is contingent on the state obtaining a $1.5 billion loan by Aug. 28, which the state treasurer assured the controller will happen.  To top of page

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.