In California Taxpayers May Get An IOU Instead Of A Tax Refund!

Like a lot of states, California is also feeling the "pinch"! Not since 1992 has the state issued IOU's instead of cash payments. In 1992, amid a budget crisis triggered by a deep recession, natural disasters and the Los Angeles riots, California ran short of cash and was forced to send out thousands of IOUs. They resembled checks but included a notice that they could not be paid by California "for want of funds."

In addition to maybe not receiving tax refunds, there is also the possibility that some student grant payments will not be made as well and that vendors may also not be paid! Under the state Constitution, schools and bondholders get first rights to any cash from the state. Among the first to get IOUs instead of payments would be business and individual taxpayers who are expecting refunds, local governments and recipients of grants from that state's student aid organization. Last year, more than 10 million taxpayers received state refunds totaling $8 billion.

Court-appointed lawyers, 1,700 judges, legislators and their staffs would also go unpaid. And officials are preparing to delay a popular program that helps elderly and disabled Californians by paying their property taxes.

Last year, nearly 5,500 homeowners benefited from a 32-year-old Property Tax Program, which was created to help keep low-income elderly people from being forced to sell their homes or lose them to foreclosure.

(For more information about student loans and grants, just click here)

There is a budget gap (projected to reach $41.6 billion dollars by the middle of next year) in California and no agreements between Govenor Schwarzenegger and the democratic legislators so far.

In a letter sent to the Democrats on Tuesday night explaining his veto, Schwarzenegger wrote: "The measures you sent me punish people with increased taxes, but do not make the serious cuts in spending necessary to balance our budget; do nothing to help keep California families working during this recession; and do nothing to help Californians facing foreclosure in this mortgage crisis."