Posts Tagged ‘California IOUs’

California Budget Crisis Update

Wednesday, July 8th, 2009

Further to an earlier blog posting on the topic of California’s decision to pay certain of its contractors in scrip, the State Legislature is considering a bill that would require the State to accept its own paper as payment for taxes, fees and other obligation due. After all, it is only fair that California accept its own currency. Irrespective of what happens with this bill, small business owners should use the IOUs as payments towards California state taxes, city taxes, fees, and other government obligations. If I were a California small business owner, I would even use the IOUs to pay the IRS. After all, the federal government is in a better position to collect from California than I am. This should dampen the pain for the businesses that are put in a terrible cash flow position with this move. Check cashing companies have indicated that they will accept the IOUs, but they charge onerous fees. Better to redeem the notes pack to the state to retire other obligations and conserve cash.