California prepares to stop paying bills

This is just the first of many states that will become insolvent in 2009. I don't think the good citizens of the great state of California will be happy getting IOUs instead of income tax refunds. At least they will get some interest-Lou

California prepares to stop paying billsCome Feb. 1, tax refunds, welfare checks replaced with IOUs

By Drew Zahn© 2009 WorldNetDaily

The state of California has run out of money.

Facing a $42 billion budget deficit, State Controller John Chiang told the Sacramento Bee he has already borrowed $21.5 billion to try to cover the state's checks, but by Feb. 1, there will be no more options left but to simply stop paying some of the bills – including tax refunds, welfare checks, student grants and other payments owned to California citizens.

"It pains me to pull this trigger," Chiang said at a news conference held in his office. "But it is an action that is critically necessary."

Federal law requires that many school and healthcare programs – a total of about $6.6 billion in California – must be paid, the Los Angeles Times reports, so Chiang has announced an expected payment freeze on $3.7 billion worth of the state's bills, most of it refunds owed to taxpayers.

But even with the freeze beginning next week, the Times reports, California will still fall $346 million short for the month of February, forcing Chiang to consider something only done once since the Great Depression: issuing IOUs. Formally called "registered warrants," the state's IOUs consist of little more than a piece of paper that says the state owes a payee money, plus interest, to be paid at some point in the future.

Read Article Here:
http://www.worldnetdaily.com/?pageId=87175