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Sacramento Fails to Pass Budget by Deadline, Hello IOUs & Hello Larger Deficit

State employees and members of the Service Employees International Union protested against Gov. Arnold Schwarzenegger's furloughs and pay cuts to state employees during a demonstration at the Capitol on Tuesday (AP Photo/Rich Pedroncelli)
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Happy New Fiscal Year! To no surprise of anyone, the state once again failed to pass the budget revision before today, the beginning of the 2009/2010 fiscal year. That means 28,742 payments, many of them tax refunds, totalling $53.3 million will be sent out tomorrow as IOUs, costing the state $3.4 billion over the next 30 years due to higher interest rates.

A new fiscal year without a budget also means the budget deficit increases from $24 billion to about $26.3 billion. Governor Arnold Schwarzenegger reportedly plans to declare a new state of fiscal emergency today, proposing additional program cuts.

Additionally, Schwarzenegger today plans to sign an executive order that would force 200,000 state workers to take yet another furlough day, their third, each month. That equals out to another 4.6% pay cut.

Democrats had tried to smooth over the budget by passing a stopgap package that would ward off IOUs temporarily. But Schwarzenegger kept to a recent theme, vowing to deny any budget solution that did not solve the entire budget, not pieces put together. “As I promised, I just vetoed a partial budget fix,” he twittered. “Now we can get to work on solving the whole problem.”