The deadbeat state
Here’s what you’ll receive in California for the time being if you are due a refund on your state income tax:
You’ll get a piece of paper saying the state owes you money but, well, it doesn’t actually have the cash to pay you.
A hastily written IOU may be something you accept from your deadbeat brother-in-law when he owes you 20 bucks. But it’s hardly the sort of thing
you want to get from your state government when there are hundreds or even thousands of dollars involved.
Although individuals awaiting tax refunds make up the lion’s share of those receiving IOUs, some county agencies and small businesses will also receive
them. And, if they can afford to hang onto the IOUs until October, people can actually make a little money on them. The state will pay interest at an
annual rate of 3.75 percent.
Those who can’t afford to wait will have this week to redeem the IOUs at a handful of major banks in the state, which will bear the risk of receiving
actual payment from the state. But leading banks have made it clear they won’t extend the redemption period beyond this week because they fear that
will only allow the state to delay efforts to resolve its budget problems.
All this is occurring because the Democratically controlled California Legislature and Republican Gov. Arnold Schwarzenegger have failed to reach agreement on
budget compromise as the state falls deeper into the red.
This spring, they came together long enough to ask voters to approve a package of borrowing increases and tax hikes aimed at heading off the state
budget shortfall. But voters overwhelmingly rejected that package.
Since then, as the governor has demanded spending cuts, Democrats in the Legislature have talked of more tax increaases. But California’s problem has
not been a lack of revenue. It has been new programs and spending growth that has far outpaced inflation in recent years.
What California politicos owe the citizens of the Golden State — far more
than dubious IOUs — is a responsible effort to curb runaway state spending.