Treasurer Jesse Unruh and Controller Ken Cory announced yesterday that "all hope is gone" for California to avoid issuing registered warrants, or IOUs, to tens of thousands of taxpayers and businesses starting next Wednesday.
"I think everybody looks at us like we're a bunch of fools. And in fact that's the case," Unruh said in reference to the months-long political stalemate over the state's $1.5 billion-plus budget deficit that is leading to next week's cash-flow crisis.
Cory said warrants would have to be issued "for at least one day" and maybe longer, depending on how long Gov. George Deukmejian and the legislature remain deadlocked on a way to balance the budget. The two men said IOUs would be issued even if a budget agreement could be reached in the meantime.
Agreement on how to erase the deficit over the long term is needed, Cory said, before he and Unruh will borrow cash from financial institutions to overcome the short-range cash-flow crisis.
"The state will be broke one week from Wednesday," Unruh added.
Cory said he would draw the state general fund "as close as possible" to a zero balance before switching to warrants. On the first day of IOUs, the controller's office calculated, about 75,000 or more warrants will be issued to income taxpayers in lieu of refunds, and 10,000 to 12,000 warrants to businesses in lieu of payment for goods and services.