California Delays Paying Bills to Avert IOUs

Here we go AGAIN!!!

Inquiring minds are looking at California’s attempt to keep from paying IOUs again:

California may have to issue IOUs unless lawmakers agree to delay paying some of the bills that accumulated as Governor Arnold Schwarzenegger and legislative leaders negotiated a budget compromise, a spokeswoman for the controller’s office said.

The deferrals are needed because California racked up $8.4 billion of delinquent bills as it operated without a spending plan for more than three months, said Hallye Jordan, spokeswoman for Controller John Chiang. That’s more than the $5 billion bridge loan Treasurer Bill Lockyer is lining up from a group of Wall Street banks to tide the state over.

The scary item is actually portrayed as a positive by an author who definitely has no economics training:

Better-than-expected tax receipts from September and significant savings built into the budget may lower the amount that needs to be put off, she said. The state’s cash purse will drop to about $1.2 billion by Oct. 28, she said.

I will bet that October, November, and especially December is even better in revenues. Since Californians are looking at very large tax increases for next year, why wouldn’t people pull income forward?


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