Controller John Chiang is trying to hold onto enough cash to pay schools and bond holders -- who legally have first claim on the treasury -- and then state employees.
Even if the governor and Legislature were to pass a budget by next week, it probably wouldn't be soon enough to head off payment deferrals, the polite word for stiffing. "Mechanically, I don't think they could generate a revenue stream in time," Chiang says.
But he'll do everything possible -- short of cutting off legally required payments -- to avoid issuing IOUs. "That would be a horrible signal to Wall Street, effectively shutting us out of the bond market."
Surely, however, Capitol politicians will have balanced the books long before IOUs would be needed, maybe in March.
"Nothing says I love you like a Valentine's Day budget agreement," quipped H.D. Palmer, the governor's budget spokesman.
Schwarzenegger will need to do some sweet-talking and explaining to California citizens, who are about to be banged by two heavy shoes.