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.
(Excerpt) Read more at news.yahoo.com ...
Sadly, true.
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.
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