Skip to comments.IOUs spell uncertainty for Calif. small businesses
Posted on 07/04/2009 6:40:16 AM PDT by SeekAndFind
BERKELEY, Calif. Business consultant Katrina Kennedy has taken her young son out of preschool and put a family vacation on hold. Dairyman Mike O'Kelly is wondering whether he is going to have to let employees go.
The problem? They rely on contracts with state agencies for much of their business and, cash-strapped California may start sending them IOUs instead of money until the state has enough cash to cover all payments.
"I've dealt with the state for many, many years, and the failure of the state to come up with a budget has always caused problems for July and August," said O'Kelly, owner of Morning Glory Inc. in Susanville, which supplies milk and eggs to prisons. "This particular economic crisis, however, has me more worried than all of the others combined."
The reason for the IOUs is California's $26.3 billion deficit. Lawmakers have not been able to agree on a balanced budget by cutting spending, raising taxes or both.
Without a balanced budget, the state controller's office says the treasury does not have enough cash to meet all its financial obligations. So IOUs were scheduled to go out beginning Thursday to private contractors, state vendors, people getting tax refunds and local governments for social services.
Assistance payments to elderly, blind and disabled people will be disbursed as usual, because the federal government is paying the state's share.
For California's small businesses and social agencies, which are accustomed to a Legislature that rarely meets the June 30 budget deadline, a lean summer is not new. Most say they expect to cope despite delays in getting paid.
Wells Fargo, Bank of America and Chase bank say they will accept IOUs from existing customers through July 10, while other banks haven't decided.
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california’s problems are:
1. illegals’ schooling and health care.
2. city, county and state unions. their salaries and pensions are too expensive.
I got my car registration papers Thursday. It is three months early. I think they are trying to get people to pay earlier then normal.
This is only a temporary fix since if I pay now, they will have less in three months.
I have not decided if I will help them out or not After all it is not due until the end of September.
Shortly, a secondary market should develop for the IOU’s into which they can be sold for discounted cash price.
3. Taxes and regulations are excessive.
Unions control the State Capitol. If I had the power, no government employee could belong to a union. The state would be forbidden to deal with unions.
It is an unfair arrangement. Union provide money, support and manpower to the politicians. The politicians give the union what ever they want.
My question is, who is looking out for the interest of the taxpayers? No one, that is who.
What will happen if people decide to PAY the state with IOUs? Will the IOU become the de facto currency in California?
There is (or was for many years) an oil well in Beverly Hills. It is on the grounds of the Beverly Hills High Scool. If an oil well can exist in Beverly Hills, why can they not work off the coast of California. Open up the coast and we solve two problems. More money for the state, and more energy for the nation.
One of the largest industry in the state of California is farming. What is the state doing to encourage this industry? Nothing, in fact they are attempting to destroy it in the name of the environment. They want to shut off the flow of water to the central valley because some fish somewhere may be harmed.
Once again, environmentalist put aninmals before people. When will we have had enough of this stuff and say stop it.
Maybe when we do not have enough food to feed ourselves let alone the rest of the world.
Send them an IOU in September.
I don’t think it works that way. Governments are funny in what they allow themselves to do, but prohibit us from doing.
They are printing their own version of currency in lieu of distributing US currency. AKA COUNTERFEITING!
Near the end of the Roman Empire, taxes HAD to be paid in gold and silver. Money paid by the govt were in gold- and silver-plated slugs. The same DNA is in today's Democrats.
Does this business gal charge sales tax, or pay other taxes to the state on a monthly basis? Well then she should remit IOU’s, shouldn’t she. If all Kalifornia businesses/individuals began this practice, the criminals in Sacramento would find a budget deal soon enough.
Email Sacramento with your information. They don’t know this.
California legislators and their pension plans and other government employees still get paid with real money. No IOU’s for them.
You have it figured out. I told someone the other day that the eventual way out will be a shooting war in the streets with the unions on one side and everyone else on the other.
Looks like the prisons won’t get their milk and eggs. How sad.
I wish he would emulate Michael Jackson.
And the Supreme Court was complicit - so much for an "independent judiciary".
Posted before but bears repeating. A few months before FDR's confiscation, two businessmen/brothers saw the handwriting on the wall and redeemed $20,000 goldbacks for coin. After the confiscation order, the Feds tracked down these guys and made them turn in their gold, giving them $20,000 in Federal Reserve Notes. They resisted and took it all the way to the Supreme Court, who said, in essence, "You got your $20,000 back, so where's the beef?" - conveniently bypassing the question of getting a lesser intrinsic value in the trade.
For the dairy farmer, it’s simple.
Stop delivering. No payment, no goods.
I heard one person who supplies the California prison system wit food say that she can only do it (accept IOU”s and provide her services) as long as her line of creidt lasts which the bank recently cut until sometime next month. After that she is out of buisness. I think CA will find these IOU’s will fall very short and the state will stop functining very soon. Very bad idea folks.