California's Taxpayer's Will Soon Be Taxing California

California's controller said on Wednesday, that he would have to issue IOUs in a week if lawmakers can't quickly solve a 24 billion dollar budget deficit, according to Reuters.

Controller John ChiangJohn Chiang stated in the announcement of IOUs, "Next Wednesday we start a fiscal year with a massively unbalanced spending plan and a cash shortfall not seen since the Great Depression. With that statement he announced that he would be forced to issue IOUs for the state's bills on July 2nd.

"The state's $2.8 billion cash shortage in July grows to $6.5 billion in September and after that we see a double digit freefall. Unfortunately, the state's inability to balance its checkbook will now mean short-changing taxpayers, local governments and small businesses", Chiang stated.

State Treasurer Bill LockyerBill Lockyer is working on a plan to draw on reserves for economic recovery sales tax bonds. Rating agency Standard and Poor's warned that bonds are sure to downgrade as a result of the plan. There is a possibility that California will face replenishing its emergency funds.

Spokesman Tom Dresslar stated, "The state is expecting to file a material event notice on Thursday to alert bondholders to the move that comes in response to plunging sales tax receipts."

"The senior coverage account will be drawn on and debt service on all economic recovery bonds will be paid in full on July 1," Dresslar said.

California is in a crisis and was obviously the first to go broke. Is this what we will see in the future with other states that seem to be falling into a black hole of debt? It is now evident that every state suffers in a crisis and the new administration up in D.C. are missing some pieces to the puzzle.

With a national deficit moving even further away from the green, you have to wonder if the stimulus was the wrong idea in the first place.