California Officially Out Of Money

February 2, 2009 10:42:57 PM PST
Last minute talks were underway in Sacramento on Monday to avert employee furloughs, which could happen as early as Feb. 6. Meanwhile, the governor and lawmakers are trying to close a $42 billion budget deficit.Feb. 1 triggered the Cash Deferral Plan, which means the state is only paying bills the law says it has to pay. State Controller John Chiang says he had no choice and has to prevent the treasury from emptying.

"My responsibility is to make sure California does not go into default. The consequences would be very severe," said Chiang.

The biggest hit will be to those who have a state income tax refund due in February.

Marilee Johnson just got her taxes done. The state owes her nearly $1400, but she won't see a penny for at least a month.

"We all have bills, and we are all trying to survive. I think it's too bad we have to wait," said Johnson.

Local clinics that help the uninsured won't get their state money either, forcing some to consider closing their doors.

"She's been going to this clinic for two years. So, if it shuts down, where is she going to go?" said Amber Tanase, who cares for her aunt.

State leaders met again, but now outside forces are making it harder for them to solve the budget crisis.

"The mood is cautiously optimistic, and there's a lot of pressure on everybody to get this done," said Assemblywoman Noreen Evans (D-Assembly Budget Chairwoman).

Labor groups are threatening Democrats with a recall if they agree to relax some worker protections. Conservatives are considering censuring any Republicans who vote for a tax hike.

Assemblyman Anthony Adams (R-Hesperia) says he will break his anti-tax pledge under the right circumstances, even if it means voter backlash.

"That's a chance I have to take. I think I'm doing what's right. I want to make sure California is on solid financial footing now and in the future," said Adams.

While delaying payments is the answer for February, that delay cannot go on forever. So, IOUs may be the answer for March or April bills.

Legally, the state has until May 30 to mail out tax refunds without interest.


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