Governor declares new state of emergency

July 1, 2009 6:58:10 PM PDT
It is official; California cannot pay its bills and therefore will start issuing IOUson Thursday. Governor Arnold Schwarzenegger, R-Calif., issued a state of emergency and says he's fed up with legislatures, but it is state workers that will feel the pain right away.

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Because of the missed budget deadline, the budget deficit is now bigger and much harder to solve. Clearly, there are more painful days ahead.

Without a budget revision in place, Gov. Schwarzenegger followed through on a threat and ordered state workers to take a third unpaid furlough day every month. Not only are public employees mad, they're nervous about surviving on 14 percent less in pay.

"My husband's an unemployed union carpenter; my nephew is an unemployed union carpenter with three children. So, I am the only working member in my house right now," says Gayle Woebcke, a state worker from Sonoma.

Because the legislature failed to send him budget revisions that should have been enacted by midnight, Governor Schwarzenegger says he has to take drastic steps to make keep the state from going insolvent, like cut payroll.

He also declared a fiscal emergency, forcing lawmakers to act within 45 days or else they can't adjourn and he told them he would not sign any new laws until the deficit is fixed.

"California needed the legislature to act boldly and with conviction. Their response was not a solution to California's budget problem but an invitation to actually a bigger financial crisis," says Gov. Schwarzenegger.

The Governor even ridiculed lawmakers for discussing issues not related to the budget mess.

"In the midst of a budget crisis, they're debating about cow tails," says Gov. Schwarzenegger.

Unbelievably, making it illegal to cut off a cow's tail is what the Agricultural Committee was discussing when ABC7 dropped by.

The missed deadline makes it almost certain the state will not be able to pay its July bills and that IOUs will go out Thursday. Assembly Republicans are fast-tracking a proposal that would make it possible for Californians to pay almost any state fee or tax with an IOU.

"Every Californian that receives an IOU will be able to use that IOU to pay the fees at the DMV and personal taxes to the state. If they have kids in the U.C. or state system, they'll be able to pay tuition with it," says Assembly member Joel Anderson, R-La Mesa.

The IOUs would be cashable in October with interest. The governor is calling on banks to take them and so far only one Sacramento credit union has said it would.

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