The budgetary situation in Sacramento is so severe the California controller is suspending payments of tax refunds, welfare checks and student grants, effective February 1. Why? The state government has been unable to close a $42 Billion budget deficit. The state is also considering the use of warrants to make payments. These are essentially promises to pay.
In 1992, California issued warrants and pressured state banks to accept them as cash. The banks went along at that time, but whether banks are sound enough to essentially finance the state’s deficit is hihgly doubtful.