CA Budget Crisis Takes Next Step

We knew the day was coming. With an impending deficit of as much as $40 billion common logic could predict severe cuts and tax increases. Remember those cuts Krugman vented about yesterday?

State Controller John Chiang warned today that unless a budget solution comes to fruition shortly, the state will start issuing IOU's.

"Without immediate cash solutions or the ability to borrow billions from the strained financial markets, the state controller's office has no choice but to pursue the deferral of potentially billions of dollars in payments and/or the issuance of ... IOUs," Chiang wrote in a letter to state agencies."

Whether Gov. Arnold Schwarzenegger and the Legislature figure it out is anyone's game.