Last week, there was news of counties suing the state for their money. LA was even thinking of withholding sales tax revenue from the state. Yes, the counties were angry then. But, imagine what happens when they get IOUs in the mail:
California’s budget woes will sweep over the state’s 58 counties this week when they get promises instead of checks for $89 million in anticipated payments for welfare, food stamps and other services.
The move will be a devastating blow to the counties, which must serve more and more people looking for government help as the economy craters and jobs disappear, said Paul McIntosh, executive director of the California Association of Counties. (SF Chronicle 2/10/2009)
That’s all well and fine for governments to transfer bad checks amongst themselves, but how are the counties supposed to turn those slips of paper into actual money for services? How does that buy food for food stamp recipients, and how does that send out welfare checks.
Of course, this isn’t any sort of solution, but John Chiang really has no choice. You can’t send money that isn’t there, and we don’t have the federal government’s luxury of printing money.
There is some money for these types of services in the stimulus, or at least there was, but there is no telling what emerges from the conference committee. Either way, the state at this point is just paying their problems forward to the actual service providers, the counties.
There are no winners now, save those who laugh at our predicament. Those who want to see the collapse of our social safety net and the civilized and advanced society that we have built here have much to love. Those who are not quite so depraved are out of luck.
Two nominations here. By the way, since it recently came up in comments, the reason we here at Calitics call the California Republican Party the “Yacht Party” can be best explained here and here.
Nominee #1: Sen. Roy Ashburn of Bakersfield, who introduced a bill that would eliminate IOUs for tax refunds.
State Sen. Roy Ashburn, R-Bakersfield, has introduced legislation requiring California’s controller to issue state income tax refunds in cash.
Controller John Chiang has announced his office will have to delay refunds for 30 days starting Feb. 1 because of the state’s cash-flow problems. He has threatened he may have to issue refunds in the form of IOUs if a budget addressing the $41 billion shortfall the state’s projected to have by mid-2010 isn’t passed.
Chiang has said refunds will resume when he’s sure there’s enough state cash on hand.
Ashburn has said tax refund money belongs to the taxpayers, not the government, and taxpayers should get it back in the form it was paid – “cold, hard cash.” California’s constantly taking in cash, he’s said.
Hey Roy, I know a bill you could pass that would get cold hard cash back in the hands of your constituents. It’s called the budget, and without it California is out of money, and fiduciary responsibilities (sorry for the $1 word) stipulate that other priorities must be paid first. It’s called “how government works,” and though you’re a State Senator I’m not surprised at your ignorance.
Nominee #2: Faux-moderate Abel Maldonado, angry about the Controller’s office “requesting new furniture” even though the current Controller, uh, didn’t do that.
“I don’t like the fact that hard working people in my district are getting IOUs and he’s buying millions of dollars worth of furniture,” Maldonado said in an interview. (For the record, taxpayers due refunds from the state and others missing payments aren’t getting IOUs just yet. They’re simply not receiving anything at all.) […]
“Had he done any homework, the senator should have realized that the expansion project, including furniture,…began before Controller Chiang took office,” his office said.
Further, Chiang’s office argued, the controller “demanded that staff cut down the costs, and by changing financing, materials, design, and construction, reduced the overall expense of the project by more than 50 percent” – a $4 million savings.
Next for Maldonado, he’ll lambaste Arnold Schwarzenegger for Prop. 187. Wanker.
Sometime next week California is going to begin running out of money, and instead of sending checks that to people that are owed tax rebates, financial aid, or other forms of state assistance, they will either have their payment delayed or receive an IOU. This will make our recession even worse, and will make it more difficult for the state to begin economic recovery.
The budget crisis has many fathers, but one in particular stands out – Arnold Schwarzengger. For five years he railed against taxes and government spending, and because he failed to lead the state toward a stable budget, California is going broke. Yet the media persists in speaking of Arnold as a strong post-partisan leader. They don’t tell Californians that he is a failure, that he is more responsible than anyone for the IOUs – particularly since he vetoed the Democratic majority vote budget plan that would have finally neutralized the 2/3 rule.
Progressive Californians need to engage in many forms of activism to respond to this crisis – and one of those forms is good old fashioned agitprop. And that’s what the Courage Campaign has done with Arnoldbucks. – our term for the IOUs that are almost inevitably going to be sent soon to Californians.
We made a video that answers the question of “what happens when Californians actually try to use an Arnoldbuck?” The result is frustrating and humorous, and hopefully it can help show Californians that this crisis literally has Arnold’s name all over it. And we also created our own version of the Arnoldbucks for Californians to download, print, and give to their friends.
Obviously the impact of Arnoldbucks, if and when they are actually sent to Californians instead of the payments they are owed, will not always be funny. Disabled families, health care clinics, and schools will be hit extremely hard by the state’s inability to meet its financial obligations. That will require a multifaceted response – including an effort to educate the public as to who is responsible for this mess. Our video campaign is one attempt to do exactly that.
So have a look at our Arnoldbucks video and share it with your friends – and help us push back against a media that refuses to hold Arnold accountable.
Below is the text of the email we sent to our members:
Dear Robert,
Just when you thought it couldn’t get much worse…
California faces financial “Armageddon,” as Arnold Schwarzenegger bluntly stated a few weeks ago. And yet Arnold and his fellow Republicans rejected compromises by Democrats to rescue our state from a catastrophic budget crisis, unparalleled in the history of California.
Because of the ridiculous 2/3rds budget rule — the super-majority required to pass a budget in the California state legislature — and Arnold’s failure to deliver even one vote from a small cabal of obstructionist Republicans, Californians may be getting IOUs in the mail next week instead of financial aid checks or tax refunds.
Many Californians are so overwhelmed by this paralyzing crisis that they’ve just tuned it out. As a result, Arnold is not being held accountable for his failure to lead.
That’s why we decided to try something a bit unorthodox — raise awareness by using humor to highlight the absurdity of these IOU’s, or what we are calling “Arnoldbucks.”
We asked one of our members to see what would happen if he tried to use “Arnoldbucks” as legal tender at a few businesses in the area. You won’t believe what happened. It’s all caught on camera — even a few security cams.
Know a friend who might need a laugh? Share this video with them, download your own Arnoldbucks, then tell us your ideas. We’d love to know what you plan to do with your Arnoldbucks:
I will be on KRXA 540 AM at 8 to discuss this and other topics in California politics
George Skelton runs hot and cold in terms of the usefulness of his observations, but today he starts to get closer to the truth by exposing Arnold Schwarzenegger’s complete failure of leadership on the budget mess. As the state moves to the edge of total meltdown, it’s becoming undeniable even to California’s centrist Villagers that instead of being some post-partisan strong leader, Arnold is just a failure:
Californians haven’t been prepared by their political leaders for the one-two punch. Sure, the public has a vague idea of what’s coming, but too many people aren’t certain it’s necessary — especially the tax hikes during a deep recession.
That’s not just my view. It’s also the observation of Gov. Arnold Schwarzenegger’s predecessor, the governor he ousted in the 2003 recall election: Gray Davis.
Gray Davis told me: “People are going to get hit with major tax increases and program reductions and no one is preparing them. Part of leadership is not just doing the job, but explaining to the public why a certain action needs to be taken. Why it needs to happen and how long it will remain.
“You have to bring people along with you. President Obama is a master of selling the public on why his programs make sense — in contrast to the deafening silence coming out of Sacramento.”
Of course, Davis isn’t quite right here – there has been more than “deafening silence” coming out of Sacramento. Arnold and his Yacht Party allies have been pretty vocal about the crisis – they believe government is the problem, and have been telling the public that at almost every opportunity. “Economic stimulus” is defined by them not as job creation (which is how Obama, the Congress, and virtually every economist see it) but as rolling back environmental and labor regulations and gutting spending.
Arnold has been consistent in pushing an anti-government message, so is it any wonder that is what the likely outcome of all this will be? Democrats speak of the 2/3 rule, as do we on the blogs, but the media centrists like Skelton rarely see fit to mention it. The public then looks at Sacramento and says “you suck” without really understanding what the problem is – a Republican filibuster intended to cram Grover Norquist’s agenda down our throats. Like Rush Limbaugh, these wingnuts weaned on talk radio want California to fail.
Arnold spent the first 5 years of his time as governor telling Californians they could have it all – a growing economy, the public services they want, and the low taxes they feel are a birthright. He sold that message so well that when he tries to turn around and say that tax hikes are necessary, nobody is listening to him.
This budget and economic crisis has many fathers, but none more prominent than Arnold Schwarzenegger himself. When the state issues IOUs next week they will be his true legacy to California – a governor who failed so completely that the state had to print funny money to meet its obligations. The honorable thing to do would be to admit failure and resign. Unfortunately we’re stuck with him for two more years.
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.
Nominee #1: 
Nominee #2: 