State Controller John Chiang (CHUNG) said Gov. Arnold Schwarzenegger and lawmakers need to come up with a complete solution to the state's $24.3 billion deficit instead of making a political statement.
"Running the state off the cliff is no way to make a political point. I don't want shock and awe. I want permanent solutions," Chiang said.
Democrats this week proposed to cut and delay billions in spending to prevent the IOUs
- without solving the whole shortfall. Republicans in the state Assembly voted for the package, but Senate Republicans rejected it and Schwarzenegger said he would veto it if it were approved.
Without a new budget, Chiang said he would have to start issuing IOUs next Thursday. Students expecting college grants, disabled people and low-income seniors may not get paid if that happens. Vendors that provide services to the state and counties that run social service programs could also miss out on payments, and taxpayers would owe interest on the IOUs, Chiang said.
Chiang, who acts as the state's accountant, said issuing IOUs will send creditors a message that the state is not able to manage its finances and would likely invite further credit downgrades. Fitch Ratings this week downgraded the state's general bond rating to "A-," from "A."
"You don't want to say you can't pay your bills," Chiang said.
The new fiscal year starts July 1, meaning an impending cash crisis is just days away.
A Friday vote on a portion of the Democratic budget plan fell short of the necessary two-thirds support in the Assembly for the second time. And a vote on Democratic proposals to raise fees and accelerate revenues failed in the Senate.
Lawmakers were scheduled to meet again Sunday.
One Republican lawmaker proposed minimizing the effects of the cash crisis by allowing people who receive IOUs to use them as a credit toward taxes, fees and liens they owe the state. The bill by Assemblyman Joel Anderson, R-La Mesa, is before the Assembly's banking committee.
