Los Angeles, CA - The Los Angeles Times reported that California expects to begin redeeming outstanding IOUs on Sept. 4, a month earlier than expected, thanks to cash savings from budget cuts, state Controller John Chiang (Democrat) announced today.

What the Times did not report is that the true debt of California amounts to more than $60 Billion and that most of that will come due before September of 2010.  Thus, California's elected officials are running a PONZI scheme - using newly borrowed money to pay off existing debts - much in the style of imprisoned fraud artist Bernard Maddoff who is now serving what is essentially a life-term.  When California defaults, which surely it must, will any of our homegrown PONZI schemers be sharing a cell with Maddoff? 

While State Controller Chiang stated that the state also will need $10.5 billion in short-term loans from investors to get through the fiscal year ending June 30 he made no mentioned, either, of the unfunded liabilities that are not be paid even though existing law requires this to be done..

California Treasurer Bill Lockyer (Democrat) said he plans to borrow the money via so-called revenue anticipation notes, or RANs, in mid-September. The RANs, which will be heavily marketed to individual investors, would mature sometime before June 30.  Thus, unless California doubles its taxation income in the next few months - a highly unlikely event - the current budget deficit will simply get larger due to unpaid interest and compounding additional debt.

The borrowing plan and the savings from the slashed state budget "should provide sufficient cash to meet all of California’s payment obligations through the fiscal year," Chiang said in a statement.  What Chiang did not state was the amount over the next fiscal year that is expected to be borrowed.  It is highly unlikely that a mere $10 Billion in borrowing will meet the cash shortfall that is anticipated in Sacramento.

Strapped for money, the state began issuing IOUs last month to pay vendors, people owed tax refunds and other creditors. Since July 2 the state has issued 327,000 IOUs totaling $1.95 billion.

The IOUs, which are paying an above-market rate, tax-free of 3.75%, have a redemption date of Oct. 2. But under Chiang’s plan, IOU holders would be able to redeem them beginning Sept. 4, if the state’s Pooled Money Investment Board goes along with the controller's recommendation to pay early.  It has been said quite often that as soon as the Governor signed the "new" budget, the Treasurer would borrow $10 billion--and he has now announced he would.  The new budget was NOT about ending the deficit--note they never said it was balanced.  The real purpose was to borrow $10 billion--just as they did when the passed the "budget" in September, 2008 and February 2009--each time the Governor signed the budget, the Treasurer borrowed another $10 billion. 

Sounds like the name of our Treasurer is Madoff, not Lockyer.  Borrowing money to pay off borrowed money is the worse way to handle finances.  What will the Democratic leadership do in October, when the State again runs out of cash and someone, other than bloggers, note the fraud of Sacramento.

When will some auditor in Sacramento stand up and tell the truth?  Borrowing money to pay for the IOU's is a disaster.  Time to cut government, cut taxes, end the union control of government agencies.  Get rid of the special interests, allow oil drilling and the revenues that come from the drilling and then California may return to a budget surplus.