Up to yesterday, there are 91,000 California IOUs totaling $354 million. According to Chiang the solution is that there is a lot of work to be done in the legislature and that the state will need to rely on human talent -- like what exists in /*Silicon Valley*/.
There was a meeting of great financial minds Thursday morning; Silicon Valley's legendary venture capitalist Michael Moritz moderated a conversation with California's chief fiscal officer, State Controller John Chiang. Chiang told the group gathered at this Churchill Club event he's trying to keep the state from going off a financial cliff.
"I don't like issuing the IOUs. There are consequences to small business, to the aged, the blind, the disabled, to college students. At the end of the day, the way to fix this is that the governor and legislature have to come to agreement and fix the budget," said Chiang.
So far, the state legislature can't agree on what the fix is. Chiang says three obvious solutions are to increase borrowing, increase taxes and cut spending. But as the state's independent financial watchdog, he's been trying to find alternative solutions.
"I'm strongly encouraging the governor and legislature to enhance their debt collection practices for state government," said Chiang. "To make sure that you go through the audits that we have engaged to cost-savings mechanisms in place, and it is not going to solve the entire $26 billion deficit that we have in California."
The moderator asked Chiang whether California is the "ghost of the future of the U.S." -- alluding to the grim economic situation. Chiang said no, California can be fixed with more transparent accounting and responsible spending. Right now the state is suffering. Its credit rating ranks the lowest in the nation and the unemployment rate is one of the highest. Some in the audience suggest one solution for boosting the economy is to encourage more businesses to expand in California.
"Until the legislature fixes these problems, you know California has an image problem, companies are reluctant to invest and grow here," said Pavi Sanbhu of The Integrity Group.
Chiang said that unfortunately for the next few days, unless the governor and legislature agree on a budget, he's going to have to continue to issue IOUs to vendors and those expecting state tax refunds.