ANDERSON BLL WOULD ALLOW IOUs TO BE USED AS PAYMENTS FOR OBLIGATIONS TO STATE

Lawmaker voted "No" on budget that included tax increases aimed at preventing deep cuts in services and closure of state parks

By Miriam Raftery

July 2, 2009 (Sacramento) – Assembly Bill 1506 by Assemblyman Joel Anderson (R-El Cajon), would let people and businesses receiving state IOUs use them as payments to the state for DMV fees, payroll taxes or other debts. Set for hearing July 7, AB 1506 would apply to individuals, cities, counties, healthcare facilities, nonprofits, and others.

Governor Arnold Schwarzenegger declared a state of emergency July 1 and ordered issuance of state IOUs after the Legislature failed to pass a budget.  Anderson joined other Republicans in refusing to vote for any budget that would raise fees or taxes. Democrats argue that revenue increases are critical to avoid closing state parks and deeply cutting public services such as healthcare, education, and more.  Options proposed by Democrats, but rejected by Republicans and the Governor, included raising taxes on cigarettes, cutting corporate tax loopholes, and charging oil extraction fees to oil companies similar to charges levied by most other states.

The IOUs may be issued to anyone owed money by the state with the exception of state workers and other exceptions covered by state law or court order (such as school bond funding). State tax refunds,  Cal-grants for college students, most health and welfare programs, funds to local governments and state vendors can all be “paid” via IOUs.

But some banks are refusing to accept IOUs as payment, leaving recipients in the lurch.  As protests mount statewide, the Courage Campaign, an Internet-based activist oragnization, has published "Arnold Bucks" (see photo) on its website to point out the "absurdity" and asks, "How will you use your Arnold bucks to pay rent or or buy food?" (http://www.couragecampaign.org/page/s/Arnoldbucks)

“While California may get away with piling up debt and then skipping out on its bills, the rest of us cannot,” said Anderson. “Businesses with state contracts, which are already operating on slim or no profit margins, will go under. bill to protect jobs and the economy. For that reason, AB 1506 deserves bipartisan support.”

Gloria Freeman, President of Staff USA, Inc., joined Assemblyman Anderson in support of the bill. Her company supplies medical staff for state prisons and other facilities. State contracts represent 80% of her business.

“I have already laid off 5 employees in preparation for IOUs,” said Freeman. “That’s why it’s important to pass AB 1506, so that we can mitigate these impacts. For many businesses like mine, AB 1506 could be the difference between life and death.”

Noah Homes, a San Diego residential care facility for people with developmental disabilities, will soon be issued a state IOU for $185,000, according to a story today in San Diego News Network. CEO Molly Nocon estimates being able to use the IOU to cover payroll taxes, DMV and licensing fees would enable the facility to offset a substantial portion, according to SDNN. Nocon predicted that smaller group homes could be forced to close their doors if IOUs are issued, leaving some patients with no place to go.

The Union-Tribune reported today that San Diego County could received up to $28 million a month in IOUs. The County surveyed local banks and found that of 22 which responded, only three (Torrey Pines Bank, San Diego National Bank, and Union Bank of California) would accept IOUs, according to the Union-Tribune article.  Bank America has reportedly announced that it will stop accepting IOUs after July 10th.