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California to resume issuing tax refunds, state controller says

State Controller John Chiang says that, with the state having adopted a new budget, he is resuming payment of income tax refunds and other obligations that were frozen last month.

March 07, 2009|Patrick McGreevy

SACRAMENTO — The check is in the mail, says state Controller John Chiang.

He began Friday resuming payment of state income tax refunds and other obligations that had been frozen last month when California ran out of cash.

Chiang said the tax refund checks, cash grants for needy families and the elderly, blind and disabled, and grants for college students can be resumed now that the new state budget is replenishing state coffers.

That plan, signed by the governor last month, includes tens of billions of dollars in tax hikes and service cuts.

But even with the new budget, there will still not be enough money in the state treasury to cover all the refund checks next month. State officials say they will need to borrow $1.5 billion to make it through tax season. That loan would be repaid later in the current fiscal year.

Despite the global credit crunch and California's poor credit rating, officials in the controller's office said they expected to have no trouble securing the relatively small loan.

Chiang had suspended $2.8 billion in payments, including $1.96 billion in personal income tax refunds and $181 million in Bank and Corporation tax refunds.

"California owes a great debt of gratitude to those who went without payments," Chiang said in a statement. He said if the state had continued sending checks during the cash crunch, it would have triggered "a massive default . . . that would have haunted Californians for generations to come."

Payments that were due in February began going out Friday. Officials at the controller's office said it will take a week or two to send all of the suspended checks. Refunds processed in March will be sent without delay.

The cash shortage had also prompted Gov. Arnold Schwarzenegger to order most state workers to take two Fridays off per month without pay, forcing many state offices to close on those days. Friday was the last day that order was to be in place.

Under an agreement negotiated between the administration and labor leaders, government workers will now be forced to take only one day off per month without pay and will choose the day.

With tax refunds set to resume and "furlough Fridays" coming to an end, a Sacramento Superior Court judge settled another issue related to the state's budget problems this week.

At the center of the ruling is the special election lawmakers called for May when they passed the budget. Among the budget issues voters will decide is whether to place restraints on future government spending. The measure to accomplish that, Proposition 1A, would also extend the tax increases Schwarzenegger signed into law by two years.

Officials at the Howard Jarvis Taxpayers Assn. filed a complaint arguing that the ballot language makes no mention of tax hikes and is thus misleading. Judge Michael Kenny ruled against the group.

But he ruled in favor of another organization that had joined the complaint. Health Access California, which advocates for the poor, said the words used in the title and summary of the measure were biased in favor of it.

The judge ordered that the words "reform" and "overspending" not be used in explaining how the spending restraints would work.

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patrick.mcgreevy @latimes.com

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