California Is Officially Broke
A period of state issued IOUs has begun as budget crisis
reaches new level.
Since legislators have yet to produce a solution to California's
$42 billion dollar budget deficit, state money has now completely stopped
Declaring itself officially broke, the state government will
begin issuing IOU's instead of check for grants, schools and any other
organization or program which was previously receiving funding. Additionally, your
California income tax refund
check this year will not be sent out until after a balanced budget is passed. Those
who have already filed their taxes will get an announcement noting the delay.
Schools will feel a great deal of pain, as the state has
been forced to hold back on $13 million in college funding through the Cal Grants
program, according to the Chronicle of Higher Education. While state
universities might have alternative funds to draw from, the pinch is likely to
affect community college students the most.
They've been at it for months, but last week Governor Arnold
Schwarzenegger claimed that legislative leaders are getting closer to a
comprehensive plan to fix the budget deficit and get the state rolling again.
"I see the will during the negotiations even though these
are very, very tough things that we talk about, where we go into areas that we
have never, ever dreamt of going into and trying to solve," he said. "So you
will be very surprised when the whole thing is done. We're still not there yet.
There is still a lot of work that needs to be done but we are moving slowly
forward with this process."
The Governor's plans involve a mix of spending cuts and a temporary
sales tax increase, along with streamlining some of the state government's
processes. Republicans have vowed to oppose any tax hikes, and Democrats have
put up several budgets, each one failing to get the 2/3 majority vote in the
The $42 billion dollar budget deficit relates to the entire
2009-2010 projected shortfall. Therefore state legislators could also choose to
only tackle a piece of the problem and focus on finding an interim solution to
the current mid-year budget deficit, which is estimated at $15 billion.