Private Vendors Complain State IOUs Aren't Easy To Cash

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(Sacramento, CA)
Wednesday, July 15, 2009

Governor Schwarzenegger and some legislative leaders are optimistic they’ll reach an agreement soon on a plan to eliminate the state’s 26-billion dollar shortfall.   
But, some business owners who’ve been receiving state IOUs for two weeks complain California’s cash crunch is pushing them closer to financial ruin. 

Capital Public Radio's Steve Shadley reports...

River City Office Supply is a few blocks away from the capitol in downtown Sacramento.   The owner, Helen Cheng, has been selling paper clips, copy machines, staplers and other supplies to the state for more than 20 years.  
“Any stuff you need for your office...we offer more than 35-thousand items...”
Cheng says 80-percent of her business comes from the state.
She’s been receiving IOU’s instead of payments from the state controller’s office for the past few weeks.  Cheng says she was able to cash them last week.   But she’s just found out that her bank will no longer accept them and she has very few options left... 
“Oh, I still accept the IOU’s but I’ll just have to wait.  I have no other choice. What am I supposed to do...just throw them away?  I’ll have to hold the IOU check until the budget is passed or see what’s going on...”
Cheng says her profits are down by nearly half because of the recession and California’s budget woes...  
“I was prepared because I knew this was coming since I’ve been doing business with the state for more than 20 years.  And, consider this for the past 12 years the state hasn’t been able to pass a budget on time?  Right?  So, I’ve learned from my own experience...”
Cheng says things have gotten so bad...she’s even considered taking out a second mortgage on her home to keep her business afloat.
Another business owner in a similar situation is Doctor Gloria Freeman.  She owns “Staff USA” in the Sacramento area community of Roseville.  It’s an employment agency that has supplied the state with nurses for more than 30 years.  Freeman has received some IOU’s but can’t cash them at her bank.   So, she’s preparing to auction them off later this month but doesn’t expect to get their full value.  California will pay 3.75-percent interest on the IOUs when the state redeems them on October second.  But, Freeman can’t wait that long... 
“What people don’t realize is that because we’ve had two budget that the vendors are already four to six weeks behind in their payments because of the budget impasses and now because of the IOUs is really devastating to the it’s like a triple whammy...” 
( Shadley asks this question)  “Are you so frustrated right now that you would consider stop doing business with the state?” (Gloria Freeman Responds)  “Actually, what I’ve really thought about doing is running for governor.  (Shadley)  Really?  (Freeman)   “Yeah, Seriously...”
As for her own business, Freeman hopes she can cash in her state IOUs soon so she can afford to make her next payroll.