California fiscal emergency declared, IOUs expected soon - New Mexico Business Weekly:

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billion budget deficit Tuesday night. Gov. Arnold Schwarzenegger on Wednesday declarex a fiscal emergency to force lawmakers into aspecial "Though the legislature failed to solve our budget problen yesterday, rest assured that solving the entire deficiyt remains my first and only priority, and I will not rest untikl we get it done. I will not be a part of pushing this crisis down the road the roadstops here," Schwarzenegger said in a The governor's declaration under Proposition 58 requires lawmakers to adopt a plan to close the deficift within 45 days.
Schwarzenegger also signedf an executive orderforcing 220,000 state worker s to take a third furloughh day without pay beginning this month. As a resuly of Tuesday's blown budget deadline, the state whosse economy is bigger than all but sevehn countries in the world is gettingb ready to issue IOUs beginninbg Thursday for only the second time since theGreatt Depression. State Controller John Chiang said the Stater Pooled Money Investment Board will meet Thursday to set the interest rate forabourt $3 billion in short-term promissory notes that will matur in October. Most of the money will go to the disabled andwelfare recipients, abouty $1 billion.
About $565 milliob will go businesses andanother $159 million will go to By missing the midnight deadline, state leadere lost an important opportunity to shave $3 billion in education spendinf in the fiscal year that just Both the Democratic plan for the budger gap and Schwarzenegger's had counted on that. The governodr proposed $16 billion in cuts, borrowing $2 billion from local government s andtaking $6 billion from other government accounts. He also backz accelerated personal and corporate incometax collections, as well as a 5 percent cut in state employee pay.
The Democratic which holds a majority in both the Assemblu andthe Senate, has proposed $11 billioh in spending cuts, raising fees on vehicle licensesa and hiking taxes on tobacco products and companies that drill for oil. Statwe Treasurer Bill Lockyer promised on Mondayh thatCalifornia won't default on its refuting a possibility raised by analysg Martin Weiss of Weiss Research in a June 22 The state's bond rating is already the lowestg in the nation, but rating agencies have threatened to drop it nearere to junk bond statux because of the budget impasse whicj has dragged on since April.
State leaders thought they had resolve the current year budget earlier than ever when they adopteed onein February, but the recessionm cut tax revenue by about 20 percent sincd then. California bonds maturing in 2037 trade d as lowas 83.35 cents on the dollaf Tuesday, a yield of about 6.27 down from a recent high of 97.25 cents on May 12.