Thread: California Eyes IOUs for Second Time Since Depression (Updat

California Eyes IOUs for Second Time Since Depression (Update1)

By Michael B. Marois and William Selway

Dec. 5 (Bloomberg) -- California, the world’s eighth-largest economy, may pay vendors with IOUs for only the second time since the Great Depression, State Finance Director Mike Genest said.

In a letter to legislative leaders Dec. 1, Genest said the state “will begin delaying payments or paying in registered warrants in Marchâ€

California may be out of cash in February

By Jim Christie Jim Christie – Fri Dec 5, 2:26 pm ET

SAN FRANCISCO (Reuters) – California is on track to run out of cash in February or March and faces a $15 billion cash shortage by the end of its fiscal year in June unless officials plug an $11.2 billion budget gap, according to the state's budget director.

Additionally, if Gov. Arnold Schwarzenegger and lawmakers fail to close the current fiscal year's budget shortfall soon, California, the most populous U.S. state, may in March delay payments to its vendors or hand them notes promising payment, according to a December 1 letter to top lawmakers from the director of the Department of Finance, Michael Genest.

A copy of the letter was obtained on Friday by Reuters.

"Specifically, it now appears certain that available cash reserves from all sources will fall below the cash cushion target of $2.5 billion in February and that the state will begin delaying payments or paying in registered warrants in March," Genest said in his letter.

"To reduce this threat, the administration is also proposing legislation to increase internal borrowable cash resources," Genest added. "However, even with this cash solution the state will not be able to pay all of its bills in the absence of quick action on the budgetary solutions."

The last time California, the world's eighth biggest economy and the largest issuer of U.S. public debt, issued payment promises to vendors was in the early 1990s.

"We're going to be very slim in February and absent any action we go into a negative cash balance in March and that means clearly we're not going to be able to pay all of our bills," said H.D. Palmer, Schwarzenegger's spokesman on state finances. "We need to take very real action to address the immediate crisis ... We're in extraordinary fiscal circumstances."

Legislative leaders were not immediately available for comment on Genest's letter, which came on the heels of Schwarzenegger calling lawmakers into a special session to close the budget shortfall.

The state's revenues have been weakening more than expected, reduced by a lengthy housing slump, sagging retail sales, turmoil in financial markets and rising unemployment.

Schwarzenegger, a Republican, is urging the Democrat-led legislature to back his plan for closing the budget shortfall with a combination of spending cuts and new revenues, including cash from raising the state's sales tax.

Democrats oppose spending cuts and the legislature's Republican minority opposes tax increases, resulting in routine stalemates on spending plans.

Those delays and budgets often tipping into deficit are major reasons why California's general obligation debt rating is paired with Louisiana's at the bottom of Wall Street's state rankings. Standard & Poor's and Fitch Ratings currently have 'A+' ratings on the debt, while Moody's Investors Service has an 'A1' rating on the bonds.

Investors are growing increasingly concerned about the state's finances. Spreads between California general obligation debt and the benchmark triple-A curve for 20- and 30-year maturities are at their highest level of the decade, topping even those when California's GO debt rating fell to 'BBB' in 2003, according to Muni Market Data, a service of Thomson Reuters.

(Reporting by Jim Christie, Editing by Chizu Nomiyama)

http://news.yahoo.com/s/nm/20081205/us_ ... _shortfall

Mexifornia continues to spend 9 billion dollars annually on illegal alien health care, welfare, food stamps, education, birth right citizenship, tuition and other programs. San Francisco spends almost a million dollars to promote it as a sanctuary city offering strapped resources and services to illegal aliens while laying off 300 city employees. The LA county supervisor told the media he spends 1 billion dollars annually on illegal immigration. The state Senate and Assembly (all open borders Mexican government socialist plants) want more benefits and services for illegal aliens while cutting jobs, resources and services for citizens. Annie (I can't do anything because my balls are in my wife's purse) Schwarzenegger continues to deny that a large part of Mexifornia's budget woes are rooted in illegal immigration despite auditors assertions that illegal immigration is a major factor in the state's economic malaise.
Gutierrez, Menendez (who is withholding E-verify until congress approves 550,000 additional visas) and other members of congress lobby for amnesty, open borders, and millions more H1B, H2A, H2B and L1 visas all for cheap labor displacing more Americans from jobs with an unemployment rate already estimated at 13 percent (including part timers looking for full time work and millions of others who have given up) which is expected to hover around 20 percent next year.
I feel that our time is limited with this country's future not looking too good at this juncture. I hope to hell I am wrong.

Dec. 5 (Bloomberg) -- California, the world’s eighth-largest economy,

We used to be the worlds fifth largest economy. Then the elites decided "multiculturalism" and "diversity" and "globalization" were great ideas.