Thread: California controller to suspend tax refunds, welfare checks

California controller to suspend tax refunds, welfare checks

John Chiang announces that his office will suspend $3.7 billion in payments owed to Californians starting Feb. 1, because with no budget in place the state lacks sufficient cash to pay its bills.
By Evan Halper and Patrick McGreevy
January 17, 2009
Reporting from Sacramento -- The state will suspend tax refunds, welfare checks, student grants and other payments owed to Californians starting Feb. 1, Controller John Chiang announced Friday.

Chiang said he had no choice but to stop making some $3.7 billion in payments in the absence of action by the governor and lawmakers to close the state's nearly $42-billion budget deficit. More than half of those payments are tax refunds.
The controller said the suspended payments could be rolled into IOUs if California still lacks sufficient cash to pay its bills come March or April.

"It pains me to pull this trigger," Chiang said at a news conference in his office. "But it is an action that is critically necessary."

The payments to be frozen include nearly $2 billion in tax refunds; $300 million in cash grants for needy families and the elderly, blind and disabled; and $13 million in grants for college students.


Even if a budget agreement is reached by the end of this month, tax refunds and other payments could remain temporarily frozen. Chiang said a budget deal may not generate cash quickly enough to resume them immediately.

Not all payments will stop Feb. 1. Most school and healthcare programs will be paid, as required by state and federal law. The state will continue to pay more than $6.6 billion in such bills.

And Los Angeles County officials said they would cover welfare payments to more than 500,000 local recipients -- for now.

But California is projected to be $346 million short of the funds it needs to pay all its bills in February. By March, the state would be so far in the red that even continuing to suspend payments would not cover the shortfall. California would be insolvent, making the issuance of IOUs likely.

State officials have already designed an IOU template, Chiang said, and have been negotiating with banks over whether taxpayers could cash or deposit them if they are issued. The state could be forced to pay as much as 5% interest on delayed tax refunds if they are not paid by the end of May, Chiang said.

The last time the state issued such IOUs -- the only time since the Great Depression -- was in 1992.

The suspension of payments is the latest radical move by officials to help keep the state from running out of cash as Gov. Arnold Schwarzenegger and the Legislature battle over how to avoid insolvency.

Schwarzenegger, who hopes to speed up public-works projects to stimulate the economy, wants tax increases, spending cuts and legislation to relax some environmental rules and allow private companies to do some government construction.

Democrats are seeking tax increases as well, but fewer spending cuts. Republican lawmakers would only pare spending and have been blocking any tax hikes.

Meanwhile, Schwarzenegger has ordered that most state workers take two days off per month without pay -- equivalent to about a 10% pay cut. The governor also ordered most state offices -- including all DMV field offices -- to close on those two days. The order is being challenged in court by labor unions.

The state has also halted payments of bond money for more than 5,300 public-works projects.

On Friday, the state Department of Finance temporarily exempted 276 of the projects from the freeze, reasoning that because they are nearly complete, it could cost the state more to shut them down than to finish them.

The exemption, through Feb. 1, will allow the continuation of school construction by the Inglewood Unified School District and the construction of a new Court of Appeal facility in Santa Ana. Work on new rail tracks at L.A.'s Union Station and road projects involving Irwindale Avenue, Martin Luther King Boulevard and Imperial Highway in Los Angeles County will also be able to continue.

Some projects were exempted because the state is under court order to do the jobs. Others would threaten public safety if left uncompleted, according to Mike Genest, Schwarzenegger's finance director.

"We're going to take the risk of allowing them to continue a little longer because we are very hopeful will have a budget by Feb. 1," Genest said.
Contractors lined up at a meeting of state finance officials to warn of the consequences of stopping the bulk of the public-works money. They said shutting down projects already underway would ultimately cost the state significantly. According to Caltrans Director Will Kempton, the state would have to pay $350 million in legal costs, claims for contract breaches and expenses for securing sites that go dormant.

"The bulk of those dollars are lost . . . to the taxpayers," Kempton said. "You can't just walk away from a construction project. You have to make sure it is buttoned up."
It is not just the state that would take a hit. Some school districts relying on state funds do not have the reserves in place to cover the payments they will owe builders if work stops.

Counties are also feeling the pinch. They process the welfare payments scheduled to be halted by the controller's office Feb. 1. The state is freezing those payments, along with millions of dollars in salaries to county workers who run the programs.

Some county officials say they don't have reserves in place to cover the state until the budget crisis is resolved.


"We simply don't have the cash," said Pat Leary, assistant administrator for Yolo County. "We are in critically bad times."

About a third of all state welfare payments go to Los Angeles County, where officials said they can shift money around to keep the payments flowing in the short term.

"The million-dollar question is how long this will last," said L.A. County Chief Executive William T Fujioka. "We cannot sustain a huge and very long hit."

evan.halper@latimes.com


http://www.latimes.com/news/local/la-me ... 2460.story

I don't see how this government, can watch this on a small scale with states already doing the nanny business and think it will work on a national level.

Exactly right crazybird. California is a large example of what will be occurring all across our nation as states continue to see out of control immigration, especially illegal. California is in close proximity to Mexico and families just hop the border and burden that state and others, and illegal aliens take billions in free services and benefits. Now, they cannot be supported by taxpayers, especially as they continue to take our jobs and push others out of the possibility of finding new jobs.

Illegal immigration and its costs will be the destruction of California. Too many people are fleeing to escape the craziness, the gangs, the crime, the balkanized areas, and the high taxes.

Psalm 91

I don't feel sorry for Arnold.
Maybe when he sinks lower, he will listen to someone and cut off everything to illegals!

California is a large example of what will be occurring all across our nation as states continue to see out of control immigration, especially illegal.

Seriously......look at every Democratic state, compare it to where the vast majorty of illegals go and show me one success story. Illinois isn't close to the border....but we have the same situation. Cracks me up too.......and both these looser states are vying for the Olympics!!!!!! Our own citizens are fleeing, and they think people of the world want to go to either place? I mean seriously, and I'm not a Dr. Phil fan, but he asks the one big question......and how's it working for you? They are the biggest draw for the most corruption and not 1 problem is fixed. They are cesspools under the guise of a pretty picture frame.

I don't feel sorry for Arnold.
Maybe when he sinks lower, he will listen to someone and cut off everything to illegals!

I don't live there and I don't know the situation.....but if it's politics in general......sometimes a person who could do something, can't because he has no support. If it's like Illinois.....you can't do anything if all those below you go against everything you try and do.

Sorry crazybird ... you will have to look at Montana. We are doing ok... not great but ok... thats why I moved here from Texas! Yes, our gov is a Democrat.

The math is simple and the results are obvious and points to the proof that this idiot of a governor has got muscle for brains..or he is being directed to break California. I think the latter.

Sorry crazybird ... you will have to look at Montana. We are doing ok... not great but ok... thats why I moved here from Texas! Yes, our gov is a Democrat.

Yet when you look at the population compared to just cities of other states....of course it works. I can't remember who said it, but there was a quote about democracy and the US....this works only with people with a moral ground and pretty much with a controlled population. In some ways I have Democratic beliefs. In my opinion....there is no excuse for poverty in the world at all....There is no excuse for hunger in the world. It becomes a problem when it's easier to collect than it is to do something. Montana might be great now.....but once everyone knows that and comes by the millions to your state to get it.....then we'll see how well it works.

I come from a people who would NEVER even THINK of having a law suit against the airline that landed perfectly in that crisis. But....watch and wait as they line up for their law suits. I come from people who don't expect monitary riches for every inconvience. I bet in Montana....you help people and do it because you should and never think someone is going to kill you or rob you if you stop to help. NOT HERE!!!!!

I'm one who believes medical care is a right. Within reason. I went a Chiropractic school and wanted to go on to be a DR.....but I was one who wanted to do the "cash box" method of payment. Pay what you can or pay nothing, because I felt if I had some gift, it was my duty to serve. Chickens, trade of services.....I didn't want to be rich or anything....this was a gift to be shared. While at the first school, I met a guy who is a great Dr......and he also expects top bucks for it. He took his tolken poor people patients, at my bidding, but he was in it for the MONEY......I on the other hand was not. We split because of that. I can't say to someone while they are bleeding to death....ya I can help you, but I won't unless you can pay for it. I don't believe or never professed to have magical cures.....but when you deny the basics....well, we cross paths.

But also with that attitude I learned there were people who took that as the ticket to abuse it. Smile and the world smiles with you,....and then there are those who smack you in the face for being stupid. That's the person whos life you saved and then sues you because you are a racist because in the conflict you placed a blanket on someone else first. Without some moral clarity, it doesn't work.

The idea is wonderful as long as there aren't those who abuse it. Once the abuse takes place....there's not enough money in the world to handle it. I'd pretty much guess Montana has worked, because there are people there who haven't abused it. I can guarentee we are in crisis because of it.

The state will suspend tax refunds, welfare checks, student grants and other payments owed to Californians

Illegals are OWED nothing, yet they will continue to receive 'taxpayer funded freebies' while those same taxpayers receive nothing. How about issuing I.D.O.U.'s (I Don't Owe You's) to illegals???