July 02, 2009

IOUs will pay 3.75 percent

SACRAMENTO - A state board has set a 3.75 percent interest rate for IOUs that California will start issuing today to pay some of its bills.

The tax-free interest will go to those who present the IOUs, formally known as registered warrants, by mail or in person to the state treasurer's office. Banks that agree to cash them early also will receive the interest, which is less than the 5 percent the state paid when it last issued IOUs in 1992.

In addition to the interest rate, the Pooled Money Investment Board approved an Oct. 2 maturity date for the IOUs, some of which may be redeemable early depending on the state's cash flow.

The failure of Gov. Arnold Schwarzenegger and state lawmakers to reach agreement this week on cuts and other measures to close a deficit that has grown to $26.3 billion will leave the state unable to pay all of its bills by the end of this month.

To manage the dwindling cash flow, Controller John Chiang warned late last month that he would have to start issuing IOUs today.

For more information, including a list of banks accepting IOUs, go to the controller's website, www.sco.ca.gov

http://weblog.signonsandiego.com/news/b ... rcent.html