California may delay tax refunds amid budget impasse

In my 2009 Financial & Economic Forecast I stated that at least one state will become insolvent in 2009. The first will be California then Ohio and Michigan then perhaps New York. All will come to the Washington begging bowl and will most likely recieve huge bailouts. Cities and small towns will also suffer greatly. Look for higher taxes and fewer services in your city or town in the months and years to come. Delaying income tax refunds, that should go over well with the people. I would be wary of owning municipal bonds until the economy starts to improve.-Lou

California may delay tax refunds amid budget impasse

With Gov. Arnold Schwarzenegger's veto of Democrats' $18-billion package of tax hikes and cuts, the state could begin issuing IOUs as soon as Feb. 1. GOP legislators join a suit against the package.

By Jordan Rau and Evan Halper

State officials on Tuesday braced for the possibility of delaying tax refunds to millions of Californians, along with student grants and payments to vendors, as the latest round of budget negotiations between Gov. Arnold Schwarzenegger and Democratic legislators collapsed.

With little more than a month's worth of cash left in the state treasury, the governor and lawmakers have been unable to agree on how to erase a budget gap projected to reach $41.6 billion by the middle of next year. Democrats announced Tuesday that two weeks of discussions had ended in an impasse and sent Schwarzenegger the $18-billion fiscal package they passed last month. The governor vetoed it, as he had promised to do.

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http://www.latimes.com/news/local/la-me-tax-refunds7-2008jan07,0,7471181.story