With its bank balance careening toward zero, California began sending tens of thousands of IOUs to its creditors Thursday, the latest black eye for the state and its broken budget system.
Nearly 30,000 IOUs began rolling off state printing presses hours after officials agreed to pay recipients 3.75 percent interest on the notes. California will continue to pay about $3.4 billion of its obligations this month with scrip instead of cash if the governor and legislators don't soon find a way to balance the state's books.
It will be the first time since 1992 that vendors, taxpayers and social service providers will receive IOUs, formally known as registered warrants, from the state. The IOUs will mature Oct. 2 unless banks agree to honor them sooner.
So far, Bank of America, Wells Fargo and Chase have said they will cash IOUs from customers through July 10, state Treasurer Bill Lockyer's office reported. But as partisan sniping continued in the Capitol on Thursday, it remains far from certain that Gov. Arnold Schwarzenegger and legislators will hatch an agreement by then.
Schwarzenegger was asked at a news conference what he would tell people who receive the IOUs in lieu of actual money.
"We don't have the money to pay our bills," he responded flatly. "It's a sad story."