I just heard Will.I.Am on NPR talking about education cuts in California.  The budget crisis has gone mainstream.  And once everyone gets the news that tax refunds, welfare checks and student grants will be suspended because the state is out of cash, a whole lot of other people might get some awareness as well.  The dirty little secret about “liberal bastion” California is that we are not a civically engaged people, generally speaking.  The budget has been in “crisis” for decades but not enough Californians have mustered up the interest in it.  We have right-wing astroturf movements that play to base emotion, but not really citizen’s movements that ask for basic fairness.  Californians are 45th in the country in volunteering, 44th in attending community meetings and 45th in working on community problems.  Chalk it up to traffic or self-absorption or what have you, but the general take is that Californians don’t see much beyond what is in front of them.  IOUs would change that.  Well, maybe.  It depends on if the banks will accept them, which is still being negotiated.

The payments to be frozen include nearly $2 billion in tax refunds; $300 million in cash grants for needy families and the elderly, blind and disabled; and $13 million in grants for college students.

Even if a budget agreement is reached by the end of this month, tax refunds and other payments could remain temporarily frozen. Chiang said a budget deal may not generate cash quickly enough to resume them immediately […]

State officials have already designed an IOU template, Chiang said, and have been negotiating with banks over whether taxpayers could cash or deposit them if they are issued. The state could be forced to pay as much as 5% interest on delayed tax refunds if they are not paid by the end of May, Chiang said.

The last time the state issued such IOUs — the only time since the Great Depression — was in 1992.

In other words, the only way this delayed tax refund is going to work is if it causes MORE debt for the state.  But let’s go back to 1992.  This was the last big recession in the country, and California again found itself unable to pay its bills.  Tell me again how the budget problems aren’t structural.  Anyway, the state issued about $350 million in IOUs that year, about 15% of what is being prepared today.  The process was not smooth:

IOUs have caused headaches for the state in the past. California issued $350 million worth of IOUs to 100,000 recipients in 1992 during a budget impasse between then Gov. Pete Wilson and the Legislature.

A four-year legal battle ensued after some workers had trouble cashing them. The dispute was settled in 1996 with some state workers getting paid time off for the inconvenience they experienced.

Beth Mills, a spokeswoman for the California Bankers Association, said individual banks statewide haven’t decided yet whether they will accept the state IOUs this time.

Banks are barely willing to lend money, I just don’t think they’re going to be interested in accepting $2.3 billion in IOUs when the process was so difficult last time, and there is more uncertainty in the financial markets now.  And even if they do, it will not be uniform across all banks, and customers are going to have varying experiences.  

The State of the State speech that nobody watched proved the need for fundamental reform, but it generated barely a blip among non-elites.  Having trouble cashing your disabled mom’s assistance payment, that’s a whole different story.  Not to mention the fact that the continued erosion of jobs and the 5,300 public works projects that have been delayed by the state will create a lot of angry and idle minds.  Of course, the cautionary part of this is that the 1992 IOUs did not lead to structural reform.  However, we all can agree that this is a much bigger problem.

Pitchforks and torches may be at a premium.  And while it’s hard to write a new Constitution in a riot, something needs to shake up this decayed and dysfunctional system.