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State Sending Out 28,000 IOUs Today

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Jul 2, 2009 12:11 pm US/Pacific

State Sending Out 28,000 IOUs Today

State Payments To Be Made With IOUs
Redeeming An IOU: What You Need To Know

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SACRAMENTO (CBS13/AP) ― No balanced budget, no money.  California will is printing thousands of IOUs today to pay for millions of dollars in money owed for social services, student grants, and more.

The state is sending 28,000 IOUs out today.  The IOUs will primarily affect the thousands of small businesses that contract with the state for a variety of services, from providing office supplies to cleaning services.

The IOUs have a 3.75% interest rate and are not redeemable until October 2nd, but banks may accept them before they are eligible for redemption.

So far, Bank of America, Chase, and  Wells Fargo says they will accept them from their customers, but only until July 10th.  More than a dozen smaller credit unions including Golden One Credit Union will also accept them.

The IOUs come a day after Governor Schwarzenegger declared a fiscal emergency and two days after the legislature failed to pass a revised budget by the July 1 deadline.

The governor's fiscal state of emergency declaration means California's state offices will be closed three days a month to conserve cash. It also means a third unpaid furlough day for 235,000 state employees.

If the Legislature fails to solve the deficit within 45 days, it cannot adjourn or act on other bills until the crisis is resolved.


(© 2009 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)

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