UPDATE, March 6:
Despite enactment of a budget,
state tax refunds are still on hold.
UPDATE: On Feb. 19,
reached a budget agreement.
So Golden State tax refunds
should be processed shortly.
Arnold wasn't kidding about California's fiscal problems.
The Golden State's finances are deep in the red right now. In fact, things have gotten so bad that the state's controller says that if lawmakers don't come up with a way to cover California's $42 billion budget deficit, on Feb. 1 he will put a 30-day hold on tax refunds and some other payments.
This action would affect a great many early filers, who get their returns in as soon as possible because they are expecting a refund. All filings that state tax officials get to before Feb. 1 will go out as usual. But those that haven't been processed by then will be held.
The state typically cuts checks as it processes returns, but under state law, tax refunds don't have to be issued until May 30.
Fast running out of money: California has not had a positive cash balance since July 12, 2007, and things have just gotten worse.
The perfect financial storm of job losses, plummeting home values and the stock market quasi-crash have taken a toll on the California treasury. Those weak economic factors have led to a severe drop in state revenue from sales, property and capital gains taxes.
And Controller John Chiang acknowledged during a news conference in Sacramento to announce the refund hold plan that delaying tax refunds and payments will only exacerbate the weak economy. People will not be able to use their tax refunds to buy cars or pay bills, he said.
"'Let me make this perfectly clear: This is a painful decision," Chiang said. "'It is an action that is critically necessary. The fallout from issuing IOUs, or for the state going into default, are significant and long-lasting and something to be avoided at nearly all costs."
Pen photo by Crystl (Flickr/Creative Commons)