Ouch. California's legislature has failed to come up with a budget that can reduce the gap in the budget projections of roughly $23.4 billion USD. This failure results in the comptroller now having to issue IOU's to those that the government owes money.
This will have an even worse effect on the budget deficit this year and in coming years for two reasons. 1) IOU's are issued with interest. Thus, while the amount is still extremely large now, it will only grow with time. The longer it takes to get a budget passed, the more they will have to spend on that interest. And 2) By having to issue IOU's, the State, which already has the lowest credit rating in the Union, has a good chance of seeing that rating continue to deteriorate. That will result in higher interest rates on bonds in the future (which CA sells frequently).
Making matters even worse is that revenues are down even from projections that took the recession into consideration.
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