Deficit forces California to issue IOUs

Once the US’s richest state, California now has the dubious distinction of having the worst credit rating in the country.

Mr Schwarzenegger said he would veto any bills that raised taxes without reforming the state’s government. “I will veto any majority vote tax increase bill that punishes taxpayers for Sacramento’s failure to live within its means,” he said. ”The legislature will have a difficult time explaining to Californians why they are running floor drills the day before our budget deadline. We do not have time for any more floor drills or partial solutions. It’s time for the legislature to send me a budget that solves our entire deficit without raising taxes.”

California is preparing to issue IOUs to its creditors this week as it grapples with an unprecedented cash crunch and prepares to begin its new fiscal year deep in the red.