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Budget Impasse Results In State IOUs

Budget Impasse Results In State IOUs
Another week of squabbling between legislative leaders and Governor Arnold Schwarzenegger over the $24.3 billion deficit has resulted in the state issuing IOUs or RAWS (Revenue Anticipation Warrants) to cover its expenses. Earlier this week, the Governor re-iterated his refusal to approve any budget measure that included tax increases and did not address the entire deficit; nonetheless, legislative leaders in the Assembly and Senate attempted to pass several “stop-gap” measures that would have lowered the state obligation for the coming budget year and provide some fiscal relief that potentially could avert the issuance of IOUs. However, the Governor, with the assistance of Senate Republicans, would not approve the measures. Stating that he was also not supportive of piecemeal efforts that did not solve the whole problem, the governor declared that such attempts were “dead on arrival.”
After intense negotiations, political strong-arming and incensed dialogue, Tuesday night Senate session ended with no resolution and State Controller poised to issue $53 million in IOUs to state vendors and contractors, students and taxpayers (which expecting refunds). Further, failure to resolve the budget by July 1, has added another estimated $2 billion to the deficit – now $26.3 billion. 
With the beginning of the new fiscal year, which began on July 1, negotiations appear to be restarting. According to the President Pro Tem of the Senate, Darrell Steinberg, taxes are apparently off the table. Without taxes, future budget remedies will likely mean increased budget cuts, additional gimmicks and borrowing from local government. 
In response to Governor Schwarzenegger’s comments deriding the Assembly for “wasting time” discussing the legislation that would prohibit the cutting of cow tails, while the state was undergoing a fiscal crisis, Steinberg also canceled all committees until budget is solved. The Governor also declared a state fiscal emergency, which means if a resolution is not found in 45 day, the Legislature is prohibited from conducting any other business except the budget.
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