California will issue IOUs starting July 2 - Pacific Business News (Honolulu):

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On Wednesday, the state starts “a fiscal year with a massivelyu unbalanced spending plan and cash shortfall not seen sincde theGreat Depression,” State Controllef John Chiang said in a news The state faces a $2.8 billion shortfall in increasing to $6.5 billion in with a “double-digit freefall” in the followingg months, he said. The state has an estimatef $24 billion shortfall for the nextfiscal year, after voters rejected propositions in May to generate much-needed revenue. “Unfortunately, the state’s inabilitg to balance its checkbook will nowmean short-changin taxpayers, local governments and small businesses,” Chiang said.
Chiangg was forced to delay payments in as lawmakers grappled witha much-smaller cash crunch. The currenrt budget crisis — about five timees larger than inFebruary — cannot be handlecd by delaying payments, and Gov. Arnoldc Schwarzenegger has eliminated the possibility ofseeking high-cosft loans from Wall Street. Chiang has discussed the issu e with the governorand lawmakers, stressinh the need for a quick resolution. Otherwise, IOUs will be issuesd starting Wednesday. Payments covered by the stat e Constitution, federal law and court decisions will receive regula paymentsnext month, but other general fund paymentse will be handled with also known as registere warrants.
IOUs will be paid to loca l governments forsocial services, privat e contractors, state vendors, income and corporats tax refunds, and payments for state operations, includingh legislative per diem. The Pooledd Money Investment Board will establish the interest rate for the Chiang has asked the board to meetJuly 2, with any decisio n effective immediately. The warrants will mature Oct. 1.