The IOU Is In the Mail

HAYWARD, Calif. (KCBS/AP)  -- As a state board meets to decide how much interest California will pay on thousands of IOUs it plans to issue today, thousands of companies who provide goods and services to state government are already feeling the pain.

For American Transit Supply in Hayward, the roller coaster of late payments from their largest customer has become business as usual, said vice president Brian Beery.

KCBS' Doug Sovern Reports

“We went through this a year ago where we had the same type of issue,” he said.  He’s become accustomed to the state “saying we can’t pay our bills till we pass the budget.”

Beery and his wife, the company’s president and CEO, employ four employees to sell air and oil filters for California Highway Patrol cars and state fire trucks.

Their contract is worth about $1 million annually, about a third of their business. This year will be the first time they’ve been paid with an IOU and they’ve set cash aside to whether the storm.

Some 29,000 IOUs in the first batch to go out Thursday will be issued to tax payers entitled to refunds totaling some $53 million.

The state Pooled Money Investment Board will set an interest rate that cannot legally exceed five percent. The board will also set a redemption date, which is likely to be October 1.

Home care workers and retirement homes are also being stung by the indecision surrounding a $26 billion deficit. The projected deficit grew by at least $2 billion when the new fiscal year began without a spending plan in place.

Gov. Schwarzenegger went up and down the state Thursday pressuring the legislature for an agreement. He held press conferences in Los Angeles and Fresno.

He declared a fiscal state of emergency on Wednesday.

Democrats in the legislature said Schwarzenegger and Republican lawmakers are to blame for the current impasse since they will not allow any tax increases.

Gov. Schwarzenegger has lobbied for draconian cuts to valuable programs that serve millions of Californians and ordered furloughs to thousands of state workers.

(jro/kmi)