Courthouse News – California won’t accept its own IOUs for payment:
SAN FRANCISCO (CN) – Small businesses that received $682 million in IOUs from the state say California expects them to pay taxes on the worthless scraps of paper, but refuses to accept its own IOUs to pay debts or taxes. The vendors’ federal class action claims the state is trying to balance its budget on their backs.
Lead plaintiff Nancy Baird filled her contract with California to provide embroidered polo shirts to a youth camp run by the National Guard, but never was paid the $27,000 she was owed. She says California “paid” her with an IOU that two banks refused to accept – yet she had to pay California sales tax on the so-called “sale” of the uniforms.
I was telling someone the other day to imagine working for a company that was in as bad a shape as California.
- Imagine your company furloughed all of its employees several days a month to reduce costs.
- Imagine their already-underfinanced pension fund made bad investments that resulted in losses of 25% of the pension fund’s assets.
- Imagine the company’s bonds are classified as “junk” with a rating as low as Russia’s.
- Imagine that in July your company took in $4.4 billion and spent $9.4 billion.
- Imagine they couldn’t pay their bills in cash and had to issue IOUs.
- Imagine that your company couldn’t balance its budget even if it fired all of its employees.
- Imagine that despite its dire financial predicament your company refused to drill for oil off its coastal property because it was still more concerned about environmental problems than financial problems.
It’s obvious that any company that had problems like California’s couldn’t stay in business. Anyone who thinks a government can be run that way is delusional.
Things are going to end badly in California. What happens in California is going to provide a glimpse of the problems the United States is going to have due to excessive spending, debt, and poorly-funded retirement programs.
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Yes, it is going to end very badly and I hope the implosion’s loud, visible and very messy. People need to be reminded that government is not some wonderful, frictionless machine pumping out goodies, but a grasping, greedy round-robin purse snatch. Bring it on, Ah-nuld.
A modest proposal: selling hunting licenses for CA liberals. That’ll raise some cash, and help get rid of the source of the problem.
She obviously deserves to be paid for products delivered, but $27K for embroidered polo shirts? That doesn’t seem like a good use of our money.
Jay, that might work, but cleaning ‘em will be a problem…..
Especially since you’ll have to scale them first, Jay.
A modest proposal: selling hunting licenses for CA liberals.
Hoo boy, even though I’m out of work (was RIFd in January, and the company I worked finally went under two months later), I’d pay for one of these, and try to bag one of the really well-known ones.
Jeffersonian – I’ll second that!
Is it legal for California to do this? Seriously, could the recipients of these IOUs band together and file a lawsuit?
Why doesn’t some operators offer 50 cents(for example) on the Cal IOU dollar ala factoring?
The market would determine the exact value of a Cal IOU dollar. It would fluctuate with the estimated value of a Cal Buck.
& the probability of ever getting paid in real dollars.
From Article 1 Section 10 US Constitution:
“No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.”
How are California’s IOUs constitutional?
Prole
They are not. But the Constitution was shredded a long time ago by DC liberal and conservative facists.
California is an addict, spending beyond even the most remote hope of enough revenue to pay the bills. Liberals will ruin the residual private sector, making the crash farther and harder to recover.
Say what you want, California’s polices looks exactly like Zimbabwei.
With CA in denial, the debt will either be federalized (see GM) or drive CA to bankruptcy.
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Why doesn’t some operators offer 50 cents(for example) on the Cal IOU dollar ala factoring?”
Someone was going to do that – CASH4IOUs. Then the SEC ruled that the IOUs had to be treated as securities.
Cali’s IOUs aren’t money. They’re warrants. They’re made out in the name of an individual, rather than being a general transferrable debt on California’s treasury, which is why they don’t violate the Constitution.
So, after the Crash, when Ca. defines
“Abandoned Areas” which will not get
government services (water, power,
firemen, police, etc.) as a safety and
cost control measure, will they still
collect taxes from those who work in
those AAs ?
And now the Californians flee the mess they’ve made, invading Colorado and the rest of the West, and repeating the same behavior that ruined California.
To M. Report
Of course they will… they will also be collecting all the guns in those areas(which they will sell for profit) to insure the “safety” of citizens in these no police zones.
Cali will be the model which obama will using for the rest of the nation to deal with debt.
I agree that California shouldn’t be allowed to sustain this horrendous fiscal behavior. But I think the likely course is that the state will cut a little spending, raise a lot of taxes, and get more bailout money from Obama and Congress. The federal government will borrow yet more money to pay for California’s profligate spending.
In the words of Obama himself, “we won.”
“California’s like a beautiful, wild… beautiful, wild girl on heroin… who’s high as a kite, thinkin’ she’s on top of the world, not knowing she’s dying even if you show her the marks. ”
http://www.imdb.com/title/tt0086216/quotes
One mandatory fix is to take all State employees off defined benefit pension plans and put them in defined contribution plans immediately.
Say Ms. Baird had sold the shirts and sent a bill to the purchaser. The purchaser has not yet paid for the shirts, intends to, but is having to delay payment for a few months.
Is Ms. Baird liable for sales tax at time of sale even if the transaction is nominally not complete (paid) or when she gets paid?
Under more normal circumstances, she might be able to ‘sell’ the account recievable, if it came to that, for cash at some discount, but the warrants are apparently not negotiable since they are considered securities and in her name so has she actually consumated a sale by receiving payment?
Here’s another bullet for you
Imagine that your company shut off water supply to the productive part of your enterprise, shutting down the profitable subsidiary, driving thousands of employees to unemployment and soup kitchen lines, paid for by company loans, all for the sake of a worthless minnow, a baitfish.
I have a feeling that the days when Western and Southern states put up with Californication are over.
“And now the Californians flee the mess they’ve made, invading Colorado and the rest of the West, and repeating the same behavior that ruined California.”–Darrell, August 11, 2009
Ha ha. I hear this often from born-yesterday know-it-alls who are ignorant of California’s history of being populated by immigrants from elsewhere in America – including Colorado. Perhaps Colorado Darrell is too young to remember Johnny Carson (a migrant to California himself) remarking that an actual native-born Californian has been discovered – living in Nebraska!
Think of it as repatriating your own, Colorado Darrell. California was a fine, fiscally conservative state until your relatives – unable to farm or find jobs in their home states – showed up in force and demanded handouts. I look forward to the self-deportation of millions of populist, soft-core socialist, and otherwise leftist Democrats whose parents and spawn ruined the Golden State. Once the losers and locusts are gone, California’s recovery can begin.
>> So, after the Crash, when Ca. defines
“Abandoned Areas” which will not get
government services (water, power,
firemen, police, etc.) as a safety and
cost control measure, will they still
collect taxes from those who work in
those AAs ?
Already happening. Visit South Oakland, Hunter’s Point or East Palo Alto.
Code enforcement may be done using satellite photos, and taxes may be collected by increasing payroll taxes (already in progress), but the govment will find “their” money somehow.
Why is she supposed to pay sales tax on a sale to the National Guard (a government agency)?
I never had to do that in all my years in business.
Chester: she didn’t sell them to the NG. She sold them to “a youth camp run by the National Guard.”
Jct: There’s nothing wrong with small denomination municipal or California State IOUs if anyone can pay their taxes with them. When Argentina’s government workers were faced with cuts, their unions talked 6 state governments into paying them with small-denomination state bonds which could be used to pay for state services and taxes by everyone.
When the local currency is pegged to the Time Standard of Money (how many dollars per unskilled hour child labor) Hours earned locally can be intertraded with other timebanks globally! In 1999, I paid for 39/40 nights in Europe with an IOU for a night back in Canada worth 5 Hours.
U.N. Millennium Declaration UNILETS Resolution C6 to governments is for a time-based currency to restructure the global financial architecture.
See http://youtube.com/kingofthepaupers on growth of the international time-trading network.
Too bad California IOUs won’t be accepted in payment for state taxes and services like state bonds were in Argentina. Too bad California IOUs will be denominated too big to use as local currency. Too bad Argentina people were smart enough to avoid the tent-cities catastrophe and California people are too stupid to follow their example.
If they make IOUs legal tender, I’ll take back every joke I ever made about Girlieman Governor Musclehead if he engineers the California state currency lifeboat.