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Local Banks Will Accept State IOUs from Customers
Current customers at a number of South Coast banks will be able to redeem in full IOUs issued by cash-poor California, but many of the banks have set a cutoff date of July 10.
Facing a $26 billion deficit and unable to pay its bills for the second time this year, the state began printing IOUs — officially, registered warrants — on Thursday. Nearly 29,000 of the IOUs will be issued to cover $53.3 million in debts, mainly for personal income tax refunds.
American Riviera Bank, Bank of America, Business First Bank, Chase Bank, Citibank, Heritage Oaks Bank, Rabobank and Wells Fargo Bank are among those that will accept the IOUs from current customers who want to cash them. The state says it will pay a 3.75 percent interest rate on the IOUs.
“We understand that these are tough financial times and we are pleased to be able to provide this service to our customers,” said Jeff DeVine, president of American Riviera Bank.
But the banks’ patience with Sacramento’s continuous budget stalemate is not unlimited, and many of them said they will accept the IOUs only until July 10. The IOUs will cost the state millions of dollars in interest and could further damage its bond rating.
“Unfortunately, the state’s inability to balance its checkbook will now mean short-changing taxpayers, local governments and small businesses,” state Controller John Chiang said last week.
Although a budget was approved in February for the fiscal year that began Wednesday, rapidly declining income tax revenues have opened up a $26 billion deficit. Gov. Arnold Schwarzenegger and the Democratic-controlled Legislature are in a war of wills over the gap, with Schwarzenegger seeking deep spending cuts and borrowing and Democrats calling for tax increases and more modest spending cuts. Schwarzenegger declared a fiscal emergency Wednesday, giving the Legislature another 45 days to address the crisis.
Click here for a related story on how the IOUs may affect Santa Barbara County.
— Noozhawk publisher Bill Macfadyen can be reached at .(JavaScript must be enabled to view this email address).
Comments
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» on 07.07.09 @ 10:24 AM
Tax and spend liberals have destroy our once great state—
Go union go broke—America new saying—now unions are bankrupting state and local agencies—how sad
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