Jason Dickerson with the Legislative Analyst’s office says it’s a simple math problem: 
 
“The state can only disperse as much cash as it has on hand.”
 
And according to the State Controller, the state may not have enough cash on hand to pay all of its bills as early as next month.  Dickerson says the Controller has two choices – Issue I-O-U’s instead of checks, or delay payments.  The I-O-U’s would cost the state interest – and the delayed payments could cost the state late fees.  Dickerson says either way, it deepens the budget hole.  He says the best thing lawmakers can do right now is balance the budget.   And he says if they wait too long, the state faces what he calls a “cash abyss:” 
 
“It seems inevitable, the longer this goes, particularly into summer and beyond without any major solutions, more and more state and local services will grind to a halt.  This is a problem that if it goes on that long and that deeply in the worst case scenario would affect every Californian and the services and payments that they get from government every day.”
 
Dickerson says even if lawmakers balance the budget quickly, the state might still have to delay some payments.  He says the Controller has discretion over what payments get put off – or who gets I-O-U’s.   Dickerson says that could include state income tax refunds, vendors who do business with the state – and elected officials.  At the other end of the scale -- those with the first draw on the Treasury - are schools and bond-holders.  California faces a cash crunch because of what Dickerson terms the “double whammy” of the tight credit market and California’s reduced revenues. Legislative leaders and the Governor have been meeting daily in an attempt to balance the budget – but so far have announced no deals

Governor Schwarzenegger gives his State of the State Address Thursday at 10 a.m.  You can bet he’ll talk about the state’s budget mess – and the cash crisis.