California plans to stop paying bills with IOUs on Sept. 4 and redeem outstanding notes that same day, ending a "shameful chapter in the state's history," state Controller John Chiang said Thursday.
The announcement means vendors, small counties and tax filers with refunds can expect to be reimbursed — with interest — just before Labor Day weekend. Some said just knowing the IOU end date brought relief since they can more easily plan the rest of their own budgets.
Even though lawmakers and Gov. Arnold Schwarzenegger cleared the main cash hurdle more than two weeks ago by agreeing on an $85 billion state budget revision, Chiang said he cannot halt IOUs until early September because the state must make large payments to schools and creditors on the first two days of that month.
Chiang, a Democrat, consulted with Schwarzenegger's Department of Finance and with state Treasurer Bill Lockyer before announcing an end date for the IOUs. He also called for an emergency meeting next week of a state panel that has the authority to set a new Sept. 4 redemption date, a month earlier than the Oct. 2 maturity date listed on the IOUs.
The state issued notes with a 3.75 percent tax-free annualized interest rate. With a maturity date of 64 days, recipients would receive $6.67 in interest for every $1,000 in IOU value, according to a calculation formula provided by the state treasurer's office.
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