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The fiscal calamity in California moved closer to the brink of total collapse this week, as the state —which has yet to pass a budget for the fiscal year that began July 1—printed up nearly $600-million worth of IOUs.
Unless Gov. Arnold Schwarzenegger manages to miraculously find a way to close a mammoth $24-billion budget gap during the holiday weekend, the first wave of 30,000 promissory notes will start flowing out to recipients, including residents awaiting their income tax rebates from the state. The IOUs will require California to repay the owed amounts, along with substantial interest.
The Governator thought he had a deal with the state legislature to approve a budget and stop the fiscal bleeding, cobbled together after months of arm-wrestling, but this package fell apart when voters decisively rejected a referendum authorizing new taxes. Without a budget deal, state officials have confirmed that California will run out of money by the end of this month.
The Golden State was among several states, mainly in the West and Southeast, that were clobbered by the collapse of the real estate market. Unemployment in California currently stands at close to 12 percent. In the desperate scramble to avoid a default by the nation’s largest state, which could further drag down the struggling U.S. economy, Arnold has proposed everything from selling the L.A. Coliseum to releasing thousands of prisoners from state penitentiaries.
As far as we know, the Golden Gate Bridge is not on the auction block yet, but there are some unconfirmed reports that several Terminator costumes and a Mr. Universe belt have turned up on Ebay.
Of the 46 U.S. states that have fiscal years ending on June 30, Illinois and Pennsylvania also have failed to pass balanced budgets while Arizona has passed a partial budget. Connecticut, North Carolina and Ohio have measures in place to keep their governments running until they pass full budgets.
So as California residents prepare to celebrate the Fourth of July — which marks, among other things, a declaration that taxation without representation is not acceptable in America — they may find an IOU in their mailbox instead of a tax refund. We’re guessing these notices feature a picture of Arnold over the caption, ”Refund? Talk to the hand. I’ll get back to you.”
Which raises some interesting questions:
If the citizens of California had simply written ”IOU” on their state income tax returns when they sent them in, would Arnold still be proposing to reduce the state’s prison population?
Or would the Governator be rounding up all the delinquent taxpayers and building more jails?
Have a glorious Fourth, taxpayers.