Politics & Government

IOU holders waiting for California's cash

California is winding down its IOU business, but the end won't come soon enough for struggling state vendors like Gloria Freeman.

President of a Rocklin temp firm called Staff USA Inc., Freeman has laid off nine workers since the state began issuing IOUs on July 2 to conserve cash. "I'm barely hanging in there," she said Monday. "We're down to the bare-bones crew."

The state expects to stop issuing IOUs on Sept. 4, and to begin redeeming the notes the same day. That's nearly a month ahead of schedule.

Still, the cash-flow problems persist for some vendors and suppliers.

Some can't find banks willing to honor their IOUs, a problem that intensified when most major California banks refused to cash the notes after July 10. A secondary market sprang up on the Internet and elsewhere, with investors offering cash, but many note holders have been unwilling or unable to sell.

Al McGorry, president of North Highlands technology vendor Capital Datacorp, was able to cash approximately $385,000 in IOUs, but he was stuck with an additional $40,000 worth when his bank ceased taking them.

"It's more of a headache than a deal-breaker or business-buster," McGorry said. "It's not crippling."

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