As the Legislature continues to debate how to address California's multi-billion-dollar deficit, the state controller began issuing IOUs on July 2, which could amount to $3 billion by the end of the month. Controller John Chiang said the state could no longer pay all its bills and, to conserve its cash, will send IOUs to people waiting for tax refunds, students receiving Cal Grants, small businesses, county social service departments and other county organizations.
The IOUs will earn 3.75 percent interest, and "You can take them to financial institutions," according to Garin Casaleggio, a spokesperson for the controller's office. He added that most banks will accept the IOUs until July 10, and that they can be taken to credit unions after that.
Many local organizations have not yet had to deal with this hassle. For example, the Foothill-De Anza Community College District offers Cal Grants to its students, but according to spokesperson Becky Bartindale, the state has not issued the district IOUs yet since the grants do not normally get disbursed until November.
"It sounds like our students escaped on this one," Bartindale said.
It's a similar story at the Santa Clara County Social Services Department, according to manager Dana McQuary. The department has not yet received IOUs, but McQuary warned that if "the budget crisis goes on past August, it is presumed we will get IOUs."
Officials from some organizations say that, even though they've been spared for now, they are struggling as they wait to find out how much money they will eventually receive from the state.
The Bill Wilson Center, which offers counseling, educational and advocacy programs for youth and families in the Bay Area, still does not know how much state funding it will get this year, according to CEO Sparky Harlan. The center, which runs a home in Mountain View for runaway teens, normally receives $400,000 from the state for its programs, Harlan said.
"We just sit and wait until they get a budget," Harlan said. "It's worse than IOUs. I wish we had IOUs."
Staffers are continuing regular programs, but don't know what the future holds.
"I could run a program for three months to find out it has been cut 10 to 20 percent," Harlan said.
The center has reserves and is in better shape than some other local agencies, she said, "but it gets frustrating to go through this."