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IOUs could cost California millions

June 26, 2009 12:00:00 AM PDT
California State Controller John Chiang warns it will cost the state millions of dollars if it starts handing out IOUs instead of payments next week. Chiang says taxpayers will have to pay interest on those IOUs. Without a new budget Chiang warns he'll have to start issuing the IOUs on July 2. He's calling on Governor Schwarzenegger and lawmakers to come up with a solution to the state's looming $24 million budget deficit.

Democrats want to delay billions of dollars in spending to prevent using the IOUs without solving the whole deficit problem. The governor says he will veto that plan.

Chiang says students who get college grants and low-income seniors won't get the money they're expecting from the state if a new budget isn't passed. Vendors who provide services to the state will also go unpaid.

The Associated Press contributed to this story.

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