California's economic woes should hit bottom in late 2009 or early 2010 — but that won't mark the end of the state's budget problems, state Controller John Chiang told a Modesto audience Tuesday.
In a speech at the Modesto Rotary Club, Chiang said the state will stop issuing IOUs on Sept. 4. He started handing out IOUs in July to local governments, businesses with state contracts, people waiting on tax refunds and others the state owed money to. He's issued 327,000 IOUs worth $1.95 billion to keep the state afloat.
Chiang explained how California reached that predicament, then offered remedies to prevent future crises. Chiang, elected controller in 2006, manages the state's $100 billion budget. He's emerged as a vocal advocate for fiscal restraint.
He sketched out the last decade of California's booms and busts, and the irresponsible spending that followed. For too long, Chiang said, state leaders have refused to save money during flush times and borrowed during lean times.
"We are mortgaging our future because of our spending practices and that has to stop," he said.
Chiang warned that the depth of the state's fiscal problems has been underreported. While it's well-known the state has been in the red since July 2007, Chiang said the public isn't aware that California has borrowed heavily — $19 billion — from "special funds," the money set aside for services such as fighting wildfires and preventing oil spills.
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