Time to start thinking about IOUs

Looks like last week's talk of a possible budget breakthrough was premature. The governor and Democratic leaders have gotten bogged down on pension reform, and talks appear to have been put on hold. All of which puts the spotlight on Controller John Chiang, who will be tallying up the September accounts next week to see how much cash the state has, and when it will be time to start issuing IOUs. From AP:

He previously said the state might have to begin handing out IOUs in mid-September, but that was delayed by higher revenue and lower spending in August than had been expected. Thousands of vendors are owed nearly $3 billion for the first three months of the fiscal year, according to Chiang's office, but they won't even get IOUs until a budget is approved. That's because state law prevents any sort of payments -- even IOUs -- without an appropriation from the Legislature, said Hallye Jordan, a spokeswoman for Chiang]. That's different from last year, when vendors were paid in interest-bearing IOUs for just the second time since the Great Depression, because the state had a budget but simply ran out of cash.

Not having a budget creates all kinds of complications. The state is holding off efforts to borrow money, and its credit cards can effectively be suspended for nonpayment. The cards are used to buy supplies and other routine purchases, including gasoline for the state's fleet.