About $50M of state IOUs remain uncashed

January 15, 2010 12:28:46 PM PST
More than $50 million worth of state issued IOUs remain uncashed. The state was forced to issue them in the midst of the budget crisis over the summer.

The state had to issue $2.5 billion worth of IOUs last summer to pay its bills because it was running out of cash during a budget stalemate -- $50 million worth remain uncashed today.

State Controller John Chiang is sending out letters to 89,000 Californians encouraging them to redeem the IOUs.

"We want to end this shameful chapter in California history. It's terrible that we had to resort to these issuances of IOUs, but it was clearly necessary," he said.

Last year, with the recession in full swing, the state's bank account was nearly overdrawn, so California had to take the rare, embarrassing step of sending out IOUs instead of actual checks.

Once a budget was finally passed by the Legislature, IOU holders were able to cash them at the end of summer with 3.75 percent interest.

There really is no financial advantage to holding on to them. The IOUs stopped collecting interest in September when they became redeemable.

The four biggest counties in the Bay Area each had more than a $1 million worth of uncashed IOUs. People could just be busy or they could have just forgotten them.

IOU holders could also just be keeping them as souvenirs.

That's what Glenn Jones in Utah wants to do and is willing to pay double the face value within reason.

"It's straight up a souvenir, like you would look at any historical document," he said. "It's a symbol of the economic struggle that California is under."

California IOUs become invalid on September 3, 2010. Those not cashed in become a donation to the state budget, which is about $20 billion in the hole.


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