California to Issue IOUs for Income Tax Refunds, Might Nix CAL Grants for Students

The Near Bankrupt State Wants to Give You an IOU. Try Paying Your Mortgage or Tuition with It.

The 2009 income tax season is slowly revving up, and soon California taxpayers are going to file their returns with the Franchise Tax Board. Some hope to receive a tax refund check to use for a bigger purchase, to pay off some credit cards, or to at least make some headway and get back on track with the overload of monthly bills.

However, if Arnold Schwarzenegger and his band of merry men cannot work out the budget, there is a good chance that the State of California will be paying income tax refunds with IOU slips instead of checks.

California democrats presented the governor with an unworkable budget package containing a number of illegal tax hikes -- referred to as "fees" and "surcharges" - that sought to get around voter determined (Proposition 13) two thirds majority vote requirements for any tax increases.

At issue was, among other things, a Democrat proposed gas tax hike of $0.13 per gallon! Squaring this with a Time magazine reported an estimated jump of California's unemployment rate to 8.5% by the end of 2009, the public outcry was loud and fierce. Lawsuits by taxpayer advocates and a flurry of emails and calls to the gubernatorial office caused Governor Schwarzenegger to veto the budget, leaving California in its continued fiscal mess.

The Los Angeles Times reports that the latest brainstorm out of Sacramento is to begin issuing IOU slips instead of California income tax refunds beginning February 1^st. Moreover, if you are student relying on a CAL grant for your tuition payment, it is time to hope and pray that the admissions office will accept your vowels instead of a check for your student fees. Student grants are also not going to be funded come February.

California is running out of money, and will officially be in the red come the end of January. Republicans are digging in their heels and have proclaimed that they will not accept any budget with tax increases. Democrats have been just as adamant that they refuse to even consider a budget if it contains any spending cuts and no significant tax hikes.