State Issues IOUs as Budget Crisis Worsens



The state will begin sending out $3.36 billion in IOUs today as Governor Arnold Schwarzenegger declared a fiscal emergency and California's budget deficit grew to $26.3 billion, according to the Chron. The governor also ordered state workers to start taking a third unpaid furlough day a month to save $425 million this year. The state's deficit grew by $2 billion after lawmakers failed to meet a July 1 deadline that would have allowed the state to save money on education.

State Controller John Chiang will issue the IOUs to private vendors and county governments — but not to schools or state workers. It's the first time the state has had to use IOUs since 1992. The fiscal emergency forces the state Legislature into a 45-day special session to solve the financial crisis. The governor said he will veto any non-fiscal, non-essential legislation during the session.