Felix Salmon

California: The haves and have-nots

By Felix Salmon
July 1, 2009
People who get California IOUs People California pays in cash
Grants to aged, blind or disabled persons University of California
People needing temporary assistance for basic family needs Public Employees’ Retirement System
People in drug prevention, treatment, and recovery services Legislators, legislative employees, and appointees
Persons with developmental disablities Judges
People in mental health treatment Department of Corrections
Small Business Vendors Health Care Services payments to Institutional Providers
60 comments so far | RSS Comments RSS

Will it be possible to use California IOUs to pay debts to the State of California, like taxes?

Posted by Guan Yang | Report as abusive

Good to know non-violent offenders will continue to rot in private prisons, but mental health treatment programs will get shafted.


Why can the members of the legislature get paid with IOUs? Its not like they are doing their job….

Posted by Olivia | Report as abusive

Isn’t it amazing that the only people to receive cash payments for being “there” are the politicians! The yahoo’s and yahooettes always get their money first. I believe a few more irresponsible propositions and illegal immigrants to assist in overwhelming the health care system of the state would be proper. And don’t feed the poor or help the mentally handicapped, but assure that the prisoners have their 52′ plasma tv’s., gym equipment and hot meals. But alas, California is not the only state with screwed up priorities.


The people getting the IOUs are almost exactly the people most likely to need liquidity.


What an elegant and pithy table.

Posted by civilator | Report as abusive

Here I was, sneering at the proposal to cut the pay of legislators when they didn’t meet Constitutional deadlines, and the State rubs my nose in it.

I still think it’s a stupid proposal — Hell, a single fatcat could bankroll the minority to filibuster a budget if that were necessary, and basically totally gut representative democracy in our state.

But somebody here ain’t running for Ms/Mr Popularity.

Posted by Walt French | Report as abusive

And in what sense are IOUs not debt that is forbidden? How is it that our holier-than-thou Governor feels free to bypass the Constitution when its suits his political purposes?

Posted by Walt French | Report as abusive

“And in what sense are IOUs not debt that is forbidden?”

It’s been before, so there’s precedent.

But Felix’s title (and the comment of dWj) says it all. It’s the have-nots getting the IOUs and the haves getting the cash. Since IOUs are basically a cut in payments – people will sell these IOUs to others in return for x% cash, where x < 100 – the worst off are taking the cuts.

Posted by a | Report as abusive

Judges, the UC system and healthcare providers…
I wonder why these items are prioritized.

I mean why would you invest in judges. Show that the state will deliver over the long term to the promises it made when it recruited your talent from a more profitable private sector.

The UCs are subpar universities which serve only the wealthy and elite. Sucking in the dollars for pitful returns in the form of research and skilled labor.

Healthcare providers will survive. These groups are very wealthy and what are the State’s IOUs to them. Medi-cal payments are generous and physicians would never turn down state patients, they can take an IOU.

Posted by Tv | Report as abusive

President Ronald Reagan, a former governor of California, made the following remark in a speech, July 28, 1988: “There seems to be an increasing awareness of something we Americans have known for some time: that the 10 most dangerous words in the English language are, ‘Hi, I’m from the Government, and I’m here to help.’” I guess some folks are a bit slower on the uptake than others.


Why doesn’t CA do something about all the illegal immigrants its supporting that pay virtually no taxes. That alone should correct so much of the problem. You want to live for free- come to CA illegally, we’ll pay for your healthcare, housing, food, education- and don’t worry about paying taxes everyone else will do that.

Posted by lellan | Report as abusive

“The UCs are subpar universities which serve only the wealthy and elite.”

The wealthy and elite don’t send their children to state schools.

Posted by Heather | Report as abusive

One way to get the state legislature to come to a reasonable budget/tax agreement would be to NOT pay the legislators and their staffs–NOT even an IOU.

They haven’t done their job. Why should they get paid??

Posted by Lilguy | Report as abusive

In a lot of these matters there are federal laws and case law requiring cash payments. You might want to add to the list of people to be paid in cash In-Home Supported Services workers who may receive just above minimum wage to do hard and unhygienic work for the elderly and people with disabilities.

lellan, there’s no worse policy than lying into a hurricane. California doesn’t control it’s borders and undocumented immigrants pay more in taxes than they receive in services, generally.


How interesting. The Californians who played a major role in creating the financial chaos — state legislators who spent more money than tax revenue could support — will not feel the ill effects of their poor choices. Instead the elderly and disabled will suffer the consequences of their mismanagement.

Posted by Jenna | Report as abusive

It sure looks like this list can be categorized into two groups: those who have lobbyists, and those that do not.

Posted by JLPeterson | Report as abusive

I was under the impression illegal aliens use less in services than they pay in taxes. This brings us to the curious question of the effects of legalizing them. If they recieve what we entitle legal residents to… well it would be quite a drain wouldn’t it.

Sarcasm Heather, Sarcasm.

Posted by Tv | Report as abusive

Article I, Section 10, Clause 1. No State shall…coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debt.

–The Constitution of the United States of America

Posted by Joe Blow | Report as abusive

Here’s the best part… the vendors that are given IOUs by the State for services provided must still pay taxes to the State on the amount “received” in REAL CASH MONEY! (According to the State Board of Equalization)


Posted by Martin | Report as abusive

I can simplify the chart even more: Those who work for the state government get cash; everyone else gets zippo.

I want to be the first to thank all the voters of California who keep pulling the lever for the Democrats. Thanks to your perseverance and “compassion” we now have a government that takes food out of the mouths of the truly needy in order to keep the bureaucrats living in style. Marie Antoinette would be proud of you.

It makes me sick that people get away with calling Republicans “heartless.”


Let me translate that to all of you who don’t speak beauracratese.

“Let them eat cake”

Posted by TrickyDick | Report as abusive

Sorry but it looks like they did the right thing. Pay the employees that earned the money first then hand out the welfare. Yes I feel empathy for the disadvantaged but more for the person that worked and earned the paycheck!

Posted by Lance G | Report as abusive

And yet,

Californians will vote again and again for one-party rule by statists. That’s the Dem Party for you people in Rio Linda.

Most laughable state in the union.

I heard they were gonna make it a law that you had to be happy, or else.

Posted by Sapwolf | Report as abusive

How much will the IOUs bring on the black market.Maybe.$.25 on the dollar.

Posted by Easyone | Report as abusive

What a wonderful world we are living in!

Posted by megiddo | Report as abusive

- Lance G “Sorry but it looks like they did the right thing. Pay the employees that earned the money first then hand out the welfare. Yes I feel empathy for the disadvantaged but more for the person that worked and earned the paycheck!”

Huh? How did the State employees earn the money before say a Small Business Vendor?

Posted by ReginaldL | Report as abusive


Understood but look at the comparison the chart makes. They paid medical providers in lieu of small vendors. I can see not paying state politicans, but the state employee worked for there money too. Believe me I AM NOT TRYING TO DEFEND THE STATE OF CALIFORNIA, I moved from there over 15 years ago and love my RED state of Arizona. I just don’t think the reporter is making fair comparisons. How would you feel if say you worked at the DMV and got an IOU but welfare checks went out? I know I would not be happy.

Posted by Lance G | Report as abusive

I have out-of-state clients who sell specialized equipment to California from time to time. The typical time required for them to receive a check already was in the five to six month range. So, California already was a deadbeat customer, even before the IOUs.

I’m advising my clients not to sell to the state until they get back on a cash basis. I’ve also advised them to raise their prices where they can to account for the “loan” to the state due to deliberate slow pay.

Posted by GaryS | Report as abusive

So, it looks like people who actually have a Contract (verbal or implied) with the State (i.e…expect that their work is actually paid for) get money, but people who Don’t (i.e…expect to receive money for their “disability” without paying into the system) get IOUs.

Posted by NotAresident | Report as abusive

People in California deserve this. And the US will soon experience the same under Obama.

Posted by Robert Hooper | Report as abusive

“You want to live for free- come to CA illegally, we’ll pay for your healthcare, housing, food, education- and don’t worry about paying taxes everyone else will do that.”

Are you sure you are writing about undocumented workers, It reads like you are referring to the bottom 50% of the tax bracket in the United States.

Posted by DJB | Report as abusive

If Californians only vote for Democrats then how is that they have a Republican Governor?

Posted by Argel | Report as abusive

Californians deserve what’s happening to them. Liberalism is a mental disease.

Posted by Sam | Report as abusive

Quit funding the illegals and the budget problem is solved tomorrow. The healthcare is FREE at ALL clinics throughout the country so stop funding the clinics, end free monies to illegals, fine businesses that hire illegals and a surplus will be back.

Posted by dan | Report as abusive

CrockObama: I will give everyone making less than 250k a year a tax cut and WILL NOT EVER RAISE YOU TAXES!!! Except when CrockObama wants to give out “free” healthcare, cap and tax and end “illegal immigration”. Taxes wiil go up for everyone to pay for this fiasco and bankrupt the entire country. CrockObama SPENT 12 TRILLION AND RISING since January 2009!!! Frightening.

CrockObamanomics is Jimmy Carter without the sweater.

Posted by dan | Report as abusive

Question, my husband get’s state disability for a recent heart failure and we finally were able to recieve benefits for the heart transplant which costs a lot of money does this mean he will get an IOU. I sure don’t want him to die because this thing. Medi-cal has allready put us through a lot and might deny his treatment but now if we get no checks from disability . . . we have bills.
Arnold had a bad heart just think if he had been out of work like us after having worked for twenty five years and paying taxes. I think he would have been disturbed that there was no place to turn and that he could die.

I don’t blame him for his life of champaigne wishes and cavier dreams but some of these disabled people are in need. There are other ways.

Posted by Karen | Report as abusive

California’s getting “Change”. Hope that works out well for them. And it’s coming to the rest of the country soon. USA will find out that bankruptcy isn’t as enjoyable as advertised.

Posted by John | Report as abusive

So does cutting out the column A people solve the problem? Looks to me like the big money is all the people in column B. This is a silly exercise.

It also seems to me that the money spend on the column A people is there to keep them from being expensive pests.

Fear not Palin will fix everything in 2012.

Posted by geo8rge | Report as abusive

My blind son is so happy that the compassionate conservatives are looking out for his best interest. It’s a wonder the legislature doesn’t spontaneously combust. I hope these bastards all rot.

Posted by tbsa | Report as abusive

Wow, did this article bring out all the reactionary nut jobs to the comments, parroting every talking point Rush told them. You think Democrats have a solid monopoly on California state government? Is that really what you are saying?? Reality would like a word with you.

And I doubt any of you have a single bit of data to back up the whole “immigrants are backrupting us!” claims. Admit it, you’re just parroting back what talk radio told you. Seriously, show ONE bit of proof that doesn’t come from Bill O’Reilly’s website.

Why is it you see all these nutjobs come out of the woodwork with their retarded “tea party” protests on out of control government spending? I guarantee you not a single one of these people batted an eye over the hundreds of billions pointlessly thrown away on Iraq and cost plus KBR contracts. These bitter hateful crazies would rather spend hundreds of billions on war, border patrol snipers, and prisons than tens of billions on domestic programs to help people.

Are there STILL people who haven’t figured out yet that “keep big government out of my life” always works out to “deregulate big business”? Who is still fooled by this anymore? It’s all good & fun to crack lazy politician jokes, but a gutted representative government should absolutely terrify EVERYONE. Do you really think the private sector cares about you more?

Posted by Worm | Report as abusive

Jct: There’s nothing wrong with small denomination California State IOUs if I or anyone else can pay their taxes with them. When Argentina’s government workers were faced with cuts, their unions talked 6 state governments into paying them with small-denomination state bonds which could be used to pay for state services and taxes and which everyone accepted as useful currency. Best of all, when the local currency is pegged to the Time Standard of Money (how many dollars per unskilled hour child labor) Hours earned locally can be intertraded with other timebanks globally! In 1999, I paid for 39/40 nights in Europe with an IOU for a night back in Canada worth 5 Hours.
U.N. Millennium Declaration UNILETS Resolution C6 to governments is for a time-based currency to restructure the global financial architecture. See my banking systems engineering analysis at http://youtube.com/kingofthepaupers
Too bad California State IOUs won’t be accepted in payment for state taxes and services like state bonds were in Argentina. Too bad California State IOUs will be denominated too big to use as local currency. Too bad Argentina people were smart enough to avoid the tent-cities catastrophe and California people are too stupid to follow their example.


Lots of fricking idiotic comments about California’s implosion being the fault of Democrats.

Anyone know what Proposition 13 did to California or who passed it? Look it up before you embarrass yourself any further.

When moronic GOPers make it so that the state can’t collect the revenue it should via property taxes, things have a way of falling apart when something like a housing bubble–inflated by banksters and Republican economics–bursts.

Prop 13 should be repealed. The state tax system should be made sane and fair, and rich people ought to be taxed for their private yachts and jets.

Posted by Jade | Report as abusive

Is this information accurate? This page from the California state government says that unemployment, disability and retirement funds won’t be paid in IOUs (see items 21 and 22): http://www.sco.ca.gov/5935.html

This page says that the IOUs will go “to private businesses, local governments, taxpayers receiving income tax refunds and owners of unclaimed property”: http://www.sco.ca.gov/5935.html

If the information provided by the government is incorrect I’m not going to fall off my chair in surprise. But where does Salmon’s information come from?


I have an idea. Lets recall a lifelong public servant and ensconce an action hero.

Posted by Gregory Stephenson | Report as abusive

can’t help but notice that there is nary a peep about Governor Schwarzeneggar here or anywhere else. How remarkable he is to be able to stay above the fray.

Posted by Norcal | Report as abusive

Interesting chart. The “pay in cash” column are mostly people and institutions with power — people you don’t want to mess with because they could help you politically. The “IOU” people on the left is everyone who would be easy to take in a street fight — aged, blind, age, mentally retarded, poor, and Mom & Pop running their store.

Posted by Jon | Report as abusive

I am a California state employee. right now I have taken a 15% pay cut since the govenor started mandating furlough days with another 5% cut being discussed. I feel that it should be known that I do not make below the salary I would make if I worked outside the state in an equivelant position. I have a house payment and other living expenses the same as non-state workers. I live paycheck to paycheck just like non-state employees. I support children just like non-state employees and I do not make enough money to have a savings or take a yearly vacation anywhere except home. so, lets not knock state employees as if they all make big bucks. we are just people trying to make a living like everyone else and just happen to work for the state of california. we live in fear of becoming unemployed just like everyone else. it’s time for people to realize that the average state employee is just like you. we have the same financial issues as you do. we are not rich, far from it. I am not even comfortable. I struggle to get bills paid, food on the table etc. I am at risk of losing my home because of the paycuts. so, what do you think? I agree that we need to do something to get the state back on track, but do you really think trashing state employees who are just like you is what we really need to be doing.
if a cut to my pay is necessary, fine. Put these cuts need to be across the board, every person that gets paid by the state needs to be included. it is necessary to raise taxes at the same time we make cuts. one or the other is not going to solve this problem. Let’s all stop taking it out on the little guy that happens to work for the state and pull together and be team players.

Posted by lesa | Report as abusive

sorry, i made a mistake. I make below the salary i would make if i worked in the same position outside the state of california.

Posted by lesa | Report as abusive

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