California's controller said on Wednesday that he would have to issue IOUs in a week if lawmakers can't quickly solve a $24 billion budget deficit, and the state's treasurer plans to tap a reserve fund to meet debt service costs.

The measures came as a budget crisis deepened in the most populous U.S. state and the gridlocked legislature failed to pass a proposed $11 billion in cuts.

"Next Wednesday we start a fiscal year with a massively unbalanced spending plan and a cash shortfall not seen since the Great Depression," Controller John Chiang said in a statement announcing that he would be forced to use IOUs to pay the state's bills beginning on July 2.

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Filed under: * Economics, Politics • Economy • Taxes • The Credit Freeze Crisis of Fall 2008/The Recession of 2007-- • Politics in General • State Government

1. Jeffersonian wrote: And there’s Arnie, warning Republicans that if they don’t become like him, they’re doomed.  The irony is so thick you can cut it with a knife. June 25, 9:42 am | [comment link]

2. Cennydd wrote: Want him?  You can HAVE him! June 25, 12:13 pm | [comment link]

3. Jeffersonian wrote: I’ll take his movies (most of ‘em) and his humidor.  The rest I’m fine leaving on the left coast. June 25, 1:02 pm | [comment link]

4. jkc1945 wrote: I wonder what kind of market will develop for California Government IOU’s.  I imagine that, within a few days, they will trade at percentages of their face value, just like other “notes.”  But when you think of it - - who would want an IOU from the State of California?  They may trade at deep discount. June 25, 6:54 pm | [comment link]

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