California Budget Deficit, Iou | featured news

Bank of America and other big institutions plan to enforce a cutoff, making it harder to cash vouchers. To protect IOU holders from third-party speculators, the SEC defines the vouchers as securities.

California's lawmakers failed to agree on a balanced budget by the start of its new fiscal year on Wednesday morning, clearing the way to suspend payments owed to the state's vendors and local agencies, who instead will get "IOU" notes promising payment.

California's controller said on Wednesday that he would have to issue IOUs in a week if lawmakers can't quickly solve a $24 billion budget deficit, and the state's treasurer plans to tap a reserve fund to meet debt service costs.