California is swimming in RED INK and is going broke.  With the debt markets still frozen, the state can not issue new bonds fast enough to cover its spending obligations.  It’s been rumored for months that California would start issuing IOU’s  to pay state workers, contractors, and perhaps even private citizens tax returns.

The IOU’s have not been issued yet, but according to marinij, at least $57 million in payments have already been halted to cover Marin projects.

With California rapidly approaching the point where it will have to start issuing IOU’s to vendors, payment has been halted to more than 75 projects in Marin totaling more than $57 million…Novato schools Superintendent Jan La Torre-Derby said she is waiting for $22 million in reimbursements from the state for improvements completed recently to facilities throughout the district. The district is also doing without another $1.5 million already allocated for three new projects: a biotechnology lab at San Marin High School, an industrial technology and design lab at Novato High School and a television broadcast studio at Novato High…

Last week, the state Legislative Analyst’s Office, which acts as a budget watchdog, warned that the state government will run out of cash sometime in February if nothing is done about California’s expected $42 billion budget deficit.

If that happens, Derby said, normal operating funding from the state would become unavailable to meet the Novato district’s $4 million monthly payroll.

To be clear, the problems in California did not spring up as a result of the 2008 financial crisis.  These problems were a direct result stemming from decades of fiscal recklessness.  During the DOT COM boom, California had ample opportunity to get their books in order from the unplanned windfall in corporate taxes.  Instead, they extrapolated the additional tax incomes out to infinity and made unreasonable projections on future growth.  The unrealistic growth expectations never materialized, but the spending was already in place and to difficult to reverse.  And the end result is that California, like many states in the union, are lining up directly behind banks, brokerages and automakers to BEG for BAILOUTS.

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