IOU’s in lieu of payments?
The State of California will run out of money within two months, forcing Governor Arnold Schwarzenegger to start settling bills and paying employees by issuing “IOU” notes, his chief financial officer has revealed.
John Chiang, the state controller, admitted on Monday that a spiralling budget crisis, which has left California spending billions of dollars more each month than it can raise in taxes, will see his coffers run dry some time in mid-February.
At present, Mr Schwarzenegger’s administration is spending $11bn a year more than its total income. The figure is now rising exponentially and has been forecast to hit $42bn by 2010.
Unless taxes can be raised, or spending reined in, millions of public-sector employees and private contractors face having their salaries paid in “registered warrants,” a piece of paper which the Governor will promise to exchange for cash as soon as he is able.
The effective bankruptcy of an entire state is unprecedented in American history, even during the Great Depression. Yet despite California’s standing as one of the most prosperous regions of the wealthiest nation on earth, its Governor seems powerless to stave off disaster.
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