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Arnold Schwarzenegger Declares “fiscal Emergency� In California

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Arnold Schwarzenegger declares “fiscal emergency†in California

California’s governer declared a state of “fiscal emergency†after lawmakers failed to agree on a budge plan by the deadline on Wednesday, Reuters reported.

From Reuters:

California’s lawmakers failed to agree on a balanced budget by the start of its new fiscal year on Wednesday, clearing the way to suspend payments owed to the state’s vendors and local agencies, who instead will get “IOU†notes promising payment.

The notes would mark the first time in 17 years the most populous U.S. state’s government would have to resort to the unusual and dramatic measure and would follow warnings by Wall Street that the state’s credit ratings may be lowered, which would increase its borrowing costs.

…

Democrats, who control the legislature, could not convince Republicans late Tuesday to either back their plans to tackle a $24.3 billion budget shortfall or make a stopgap effort to ward off the IOUs. The two sides agree on the need for spending cuts, but are split over whether to raise taxes to help fill the gap.

Democrats have pushed for new revenues while Republican lawmakers and Governor Arnold Schwarzenegger, also a Republican, have ruled out tax increases. They want deep spending cuts to balance the budget, but Democrats say that would slash the state’s safety net for the needy to the bone.

The FT reported earlier on Wednesday that the first batch of “California IOUs†were already off the printing presses:

With the state teetering on the brink of fiscal collapse, the controller’s office is scrambling to issue about 30,000 IOUs, which California is offering instead of tax rebates because it has run out of money.

Thousands more IOUs will be printed over the next days and weeks if a budget deal cannot be struck.

The state is preparing to issue IOUs equivalent to a month’s worth of funding - or $591m - for programmes that provide supplemental income to the elderly. Another batch, worth $363m, will be issued to a network of regional non-profit centres across California that work with the developmentally disabled.

But those IOUs might not be so easy for recipients to cash in, according to a post by Reuters columno-blogger Agnes Crane:

With the California controller getting ready to send out the first batch of IOUs on Thursday, banks in the state are still trying to figure out if they want to buy the warrants from depositors. If they decide not to, get ready for crunch time and most likely the emergence of some kind of distressed debt market that will scoop up the IOUs - at a price - from those desperate for cash.

Just because the IOUs are sent to a specific person, business or local government doesn’t mean that they can’t be traded in or simply just traded. Whoever ends up holding them by their maturity date can redeem them with the state. And there’s certainly enough IOUs coming down the pipeline to make for a nice liquid market.

But, Crane warns, there’s a catch:

California will stamp an Oct. 1 maturity date on the IOUs, but will only redeem them if there is sufficient cash available.

That adds another layer of risk given the gridlock over the budget and the more than $24 billion gap that needs to be closed by lawmakers and a governor who can’t agree on where the pain should be felt most. It also means a logistical headache for those holding the IOUs since presumably they would have to send in the old IOUs to get new ones if the state coffers are still empty.

"When the fvck am I going to get paid, you Austrian ba$tard?!"

"Two Weeks" -

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I wonder if when he signs the cheques he also writes on them 'I'll be back'

Fizkal emurgenceey! Ben get to da choppa!

Edited by enrieb

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http://www.imdb.com/title/tt0097889/

"With the state teetering on the brink of fiscal collapse, the controller’s office is scrambling to issue about 30,000 IOUs, which California is offering instead of tax rebates because it has run out of money.

Thousands more IOUs will be printed over the next days and weeks if a budget deal cannot be struck.

The state is preparing to issue IOUs equivalent to a month’s worth of funding - or $591m - for programmes that provide supplemental income to the elderly. Another batch, worth $363m, will be issued to a network of regional non-profit centres across California that work with the developmentally disabled.

California will stamp an Oct. 1 maturity date on the IOUs, but will only redeem them if there is sufficient cash available."

Edited by Tom Peters

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http://www.imdb.com/title/tt0097889/

California . . . . will only redeem them if there is sufficient cash available."

Hmmmm. But if there was cash available, they wouldn't be giving IOUs in the first place.

Somehow, this idea doesn't inspire a lot of confidence.

Is it just a disguised way of cutting services, knowing that many service providers won't work for IOUs? Is it a cunning plan?

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Guest DissipatedYouthIsValuable
Hmmmm. But if there was cash available, they wouldn't be giving IOUs in the first place.

Somehow, this idea doesn't inspire a lot of confidence.

Is it just a disguised way of cutting services, knowing that many service providers won't work for IOUs? Is it a cunning plan?

All money is an IOU.

What if everyone starts using ArnieBucks as an alternative to Federal Reserve Notes?

Naturally, if one were paid in something which is not legal tender, how can they be taxed on it?

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Guest Steve Cook
All money is an IOU.

What if everyone starts using ArnieBucks as an alternative to Federal Reserve Notes?

Naturally, if one were paid in something which is not legal tender, how can they be taxed on it?

interesting

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What if everyone starts using ArnieBucks as an alternative to Federal Reserve Notes?

And supposing people started trading them for the new vouchers being issued by the Latvians, who haven't got any money either . . . .

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"Geev me your clodes"

Has there ever been a time when California wasn't f*cked?

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Presumably the idea is that declaring something as an emergency helps brace people for drastic action? Something like trying to engender wartime spirit amongst the Californians?

The only trouble is, it's an emergency of their own making. If the government imposes food rationing and conscription because Hitler is trying to batter down the door, well that seems fair enough. If they do it because Arnie can't balance the books I can't imagine it will go down so well.

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Presumably the idea is that declaring something as an emergency helps brace people for drastic action?

But, it is an emergency.

And in some ways you can respect Arnie. He is one of the few politicians who isn't in denial. And he plans to begin cuts by shutting down Government offices.

Quote

“Every day we wait, the problem is getting bigger, the deficit is getting bigger, because right now we are spending money that we don’t have,†Schwarzenegger told reporters at a Sacramento news conference.

Can you imagine Gordon owning up to that?

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Guest sillybear2

"Run! Get to the chopper!" - Arnie in Predator

Edited by sillybear2

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Naturally, if one were paid in something which is not legal tender, how can they be taxed on it?

Unfortunately you get taxed on profit or what you earn not what cash you've received.

If you don't get paid and must wwrite it off then that's deductable.

Anyone with any sense will not accept these IOU's so they're worthless anyway.

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Anyone with any sense will not accept these IOU's so they're worthless anyway.

That's the really interesting part.

The first recipient has no choice. A typical recipient being a defense attorney, appointed by the State.

Government health workers may be paid in IOUs too, but can they be traded on to their labs?

At the moment, the banks aren't saying whether they will accept them or not.

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Guest sillybear2

For contractors it would probably be more tax efficient for the state's outstanding bills to remain officially unpaid on long settlement terms rather than accept these IOU's, what good are they if they're not accepted by employees, the IRS and other companies?

Edited by sillybear2

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It seems Arnie calls a state of emergency every month. Only took 13 cases of swine flu before he called the last one. Forest fire before that.

He certainly likes to be dramatic. He should be an actor.

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Guest sillybear2

"I'm going to need your paper, your ink and your printing presses"

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