It is not welcome news to the estimated 2.7 million taxpayers who filed early so they can get and use their return as soon as possible. In these unstable economic times, that is money people rely on now more than ever.
At a Bayview-Hunters Point Wells Fargo taxpayers waited in line Saturday to file their income taxes.
The service they used is a free one single moms like Nichelle Johnson are using to make sure her taxes are done correctly and quickly.She is relying on the $2500 return she usually gets a few weeks after filing.
"I'm not using it to do anything frivolous like going shopping or anything. I'm just using it because right now I'm unemployed and I can use it money to pay off some of the bills," Johnson says.
But, without a state budget in place State Controller John Chung will hold onto nearly $2 billion in tax refunds and use that money to keep the state running.
Taxpayers could receive IOUs instead.
"They can give IOUs as long as they pay interest on it," quipped San Francisco resident Artemese Kelly.
It turns out that is something the state is not immediately required to do.
"45 days after the April 15th deadline? so in essence June 30th. That's when you get interest," says tax preparer Kenneth Lee.
Upon hearing that Kelly declared, "That's kind of messed up."
Marcus Duty of San Francisco agreed saying, "Wow. That's a heartbreaker right there."
Democratic state legislators Mark Leno and Assemblyman Tom Ammiano agree. That is why they are hopeful a budget will pass this week.
"With the resolve on the budget coming soon, that will offer relief and the IOU situation will not affect this program," says Tom Ammiano.
The average personal state income tax refund is $853. Of course, there are no guarantees legislators will take action this week.