The state of California has officially run out of cash.
Now, it appears the fallout from California's epic budget shortfall is about to trickle down from the chambers of the lawmakers to the hands of the people -- in the form of IOUs.
State Controller John Chiang today issued a warning saying the IOUs might be necessary, in light of how the legislature missed the June 30 deadline to reconcile a historic $24 billion shortfall, or roughly 25 percent of the state's $100 billion budget.
"Due to the cash shortage, the State has no alternative but to issue registered warrants, or IOUs, to private businesses, local governments, taxpayers receiving income tax refunds and owners of unclaimed property," his office said in the statement.
a href="http://www.sco.ca.gov/5919.html" target="_blank">Also affected could be students who receive state aid, as well as welfare recipients, disabled people, contractors, mental-health patients and the courts.
In July alone, the shortfall is projected to reach $3 billion, which is roughly what the IOUs will add up to. (The state does have enough cash in July to make about $10 billion worth of regular payments.) Chiang warned that the deficit could grow to $6.5 billion by September if the stalemate isn't broken.
IOUs haven't been used in California since the recession of the 1990s, when then-Gov. Pete Wilson issued them to 100,000 state employees. Before that, IOUs hadn't been used since the Great Depression, according to the New York Times.
Chiang's office says the IOUs are a "promise to pay" with interest. The state plans to reimburse the IOUs by October 1, "if there is sufficient cash," Chiang's office said.
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